Concerns Raised Over US Securities Laws and Digital Assets
During a recent House Committee hearing, concerns were raised about the inadequacy of the United States securities laws in addressing the unique challenges posed by digital assets. Rodrigo Seira, special counsel at Cooley LLP, highlighted this issue on April 9, expressing skepticism about the feasibility of crypto projects successfully registering with the Securities and Exchange Commission (SEC). He was joined by several notable figures, including Tiffany J. Smith of WilmerHale, Jake Werrett from Polygon, and Alexandra Thorn from the Center for American Progress.
Regulatory Framework and Challenges
In his remarks, Seira pointed out,
“The current regulatory framework for securities is simply not equipped to manage the complexities of crypto. It fails to fulfill its intended policy objectives.”
He categorically dismissed the notion that crypto businesses could effectively register their tokens with the SEC, stating,
“This idea is clearly untrue.”
While Seira acknowledged that ventures raising capital through crypto should be subjected to federal securities legislation, he lamented that nearly no cryptocurrency projects have managed to register successfully under these laws. Many have poured substantial resources into efforts to comply with regulations, only to face failure or the persistent fog of regulatory ambiguity. He added that the registration process itself is burdensome, likening it to that of publicly traded companies, which entails ongoing reporting obligations.
Legislative Efforts and Future Outlook
The hearing was introduced by Representative Bryan Steil, who leads the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence. He noted the obstacles imposed by previous administration policies while indicating current efforts to correct these issues through legislative action. For instance, the House Financial Services Committee recently progressed the STABLE Act, aimed at regulating stablecoins linked to the U.S. dollar and various fiat currencies. Similarly, the Senate Banking Committee has endorsed the GENIUS Act, which seeks to impose reserve requirements on stablecoin issuers and ensure adherence to Anti-Money Laundering statutes.
Steil emphasized the importance of moving forward with a comprehensive regulatory framework for digital assets, which includes delineating legal classifications and the jurisdictional powers of regulatory bodies such as the SEC and the Commodity Futures Trading Commission. Another key voice in the legislative effort, Representative Ro Khanna, expressed optimism that a market structure bill would be enacted this year to provide clarity in a field that has been historically murky regarding oversight and governance.
