In a recent WSJ OpEd, Jay Clayton, SEC chair from 2017-20, and Timothy Massad, CFTC chair from 2014-17, argue that both agencies must take steps beyond enforcement to move closer to the end goals of integrity and investor protection in crypto markets. They point to the limited utility of litigation — it won’t address critical questions like whether laws need to be adjusted for the features of tokens and how the federal government can oversee the trading of tokens, like bitcoin, that aren’t securities.
In addition to enforcement efforts, they believe the SEC and CFTC should, either directly or through an SRO, create basic standards for investor and market protections, preferably with Congress mandating them. They argue that these standards could avoid sticky classification issues that exist today, focus on major issues (like “wash trading”), address existing information asymmetry problems without requiring a rewrite of existing laws and, if an SRO was used, wouldn’t cost taxpayers anything to implement.
As the Broadridge report I blogged about above notes, “developing disclosure principles for a novel industry is not entirely a linear process.” But the data from Broadridge’s survey could be useful input if the agencies ever went down this path.
– Meredith Ervine