U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce expresses her disappointment in the agency’s lack of predictability.
In a speech, Peirce said the enforcement actions brought by the SEC against blockchain-based payment network Library (LBRY) and crypto asset trading platform ShapeShift arose due to regulatory ambiguity.
“Some of the SEC’s recent crypto cases illustrate the problem that a lack of predictability poses. These cases seemed random to many, including me.”
In March, the SEC filed charges against ShapeShift, alleging the platform had been buying and selling crypto assets as securities. The company agreed to pay a $275,000 fine to settle the charges.
Peirce says ShapeShift’s legal problem stems from uncertainties about how the SEC determines crypto assets as securities.
“It is entirely unclear how ShapeShift was to determine that the Commission would consider crypto assets in general – and all crypto assets in particular – to be a security in the form of an investment contract. Even now, ten years later, it is barely noticeable. But perhaps that ambiguity is exactly the result the Commission wants.”
Peirce says the same thing happened to LBRY. The SEC filed a lawsuit against the company in 2021, accusing it of selling crypto assets as unregistered securities. A judge ruled in favor of the regulator.
“LBRY has lost a landslide lawsuit – based not on fraud, but on a failure to anticipate how the Commission would apply registration rules designed for traditional equity or debt securities to an entirely new genre of business ventures.”
Peirce says the SEC should promote a predictable regulatory framework to give people the confidence to invest and encourage entrepreneurs to try something new.
“Rules must keep pace with changes in the market, but predictability is an essential condition for a vibrant entrepreneurial culture. Rules can change, but they should do so after sufficient time for public discussion about the wisdom of such changes.”
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