Good afternoon. It’s great to see you all here.
I anticipate discussion today around two big questions: one, are crypto assets securities subject to SEC jurisdiction under existing law; and two, should they be? Enhancing regulatory clarity is a laudable goal. So is reasoned policy debate. As long as our goal is to promote compliance with, and not avoidance of, a legal framework that is faithful to the SEC’s mission to protect investors and the markets.
As we delve into today’s topics, we must bear in mind that the stakes could not be higher. You will be discussing the legal underpinnings of the $120-trillion U.S. capital markets, which remain the envy of the world. The financial wellbeing of tens of millions of Americans, and countless American businesses, depends on consistent and effective regulation of our markets. This regulation rests on a well-built edifice of law that, over the last 90-some years, has been duly built up by Congress and the courts. At the foundation of that structure is the definition of a “security.” And the Commission has used this definition for decades to successfully regulate an incredibly diverse array of financial products.
We cannot poke holes in the foundation without expecting the walls may crack. Modifying the law to facilitate the success of a chosen product category is fraught with risk. Risk not only of weakening regulatory protections for that category, but of creating a negative domino effect on other areas of the market protected by the same laws. For the SEC, holistic protection of the markets has always been and must remain our North Star.
That said, I understand there is a view that current law is not working for crypto. And I agree that policy must keep pace with new products and technologies. I welcome a diversity of views, and urge you to present those views with careful consideration of the potential benefits and costs of proposed actions. This means asking, for example:
- What authority does the Commission have to make such changes?
- How do you balance the desire for greater clarity with the need for a sufficiently flexible definition of “security” that cannot be easily evaded?
- Does the contemplated change protect investors, the capital markets, and national security? This is critical given the heightened risks associated with crypto assets, including, just to name a few, their speculative nature, a disproportionately high volume of scams and frauds, lack of legal redress available against bad actors that are unidentifiable or located abroad, and use of crypto assets to finance crime and terrorism.
- If the intention is to create special rules for crypto assets, how can those assets, either as a group or by specific type, be clearly defined and differentiated from other types of assets to which those rules are not intended to apply?
- Will any new legal framework for crypto assets deliver a similar level of investor and market protections to that of other, similar asset classes? Will it provide a level playing field among market participants?
I look forward to hearing a variety of viewpoints today on these and other issues. Thank you to the Crypto Task Force for organizing this event, and thank you all for your participation and engagement with the Commission.
