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The work of creating crypto- and investor-friendly legal frameworks in the United States continues. Thankfully for the web3 community, they have friends in high places.<\/p>\n
It\u2019s been almost three years since Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission (SEC) released her updated<\/a> Token Safe Harbor Proposal 2.0 \u2013 but she isn\u2019t giving up.<\/p>\n While the proposal hasn\u2019t made headway in its prior forms, the commissioner is not giving up. \u201cI think we would definitely need a 3.0\u201d version if the government wants to keep crypto innovation alive in the U.S, she said during an exclusive fireside chat<\/a> with TechCrunch at Georgetown University\u2019s McDonough School of Business.<\/p>\n \u201cThere\u2019s room for something to address the legitimate concerns that crypto-skeptics have, while addressing the legitimate concerns of innovators,\u201d Peirce added.<\/p>\n The proposal\u2019s previous versions aimed to \u201canswer the question a lot of people had,\u201d surrounding the issuance of tokens, Peirce said. She explained that she built an earlier iteration of the concept after the initial coin offering (ICO) boom of 2017, when a lot of startups launched their own tokens, and there was \u201cnot a lot of disclosure around them.\u201d<\/p>\n The safe harbor plan aimed to provide initial development teams with a three-year grace period during which they could participate in and create a decentralized network, and be exempt from \u201cregistration provisions of the federal securities laws so long as certain conditions are met,\u201d according to a GitHub document<\/a>.<\/p>\n Peirce\u2019s proposal aimed to require people to make disclosures for the initial period when they were selling tokens. From there, the idea was that \u201cif the blockchain was really decentralized, so that no one had any more information [i.e. insider information] than anyone else, the disclosures wouldn\u2019t be necessary anymore because all the information would be out there and available to anyone.\u201d<\/p>\n While the commissioner said she hasn\u2019t laid out the details for 3.0 yet, she is open to people tossing ideas her way. \u201cI welcome ideas not only on the Token Safe Harbor, but more generally \u2014 if the SEC were to wake up tomorrow and say, \u2018We want to take a more productive approach,\u2019 what would ideas look like [and] where would we need to spend our time?\u201d<\/p>\n It\u2019s unreasonable to expect a new token project to have the same kind of disclosures and legal understanding as a company that\u2019s been around for 15 years and is doing an IPO, Peirce thinks. \u201cThere\u2019s just a real mismatch between the expectations that some people would like to put on these token projects and the reality,\u201d Peirce said. \u201cThe result is, we end up in the worst of both worlds: we don\u2019t get any disclosure and we get companies moving outside the U.S.\u201d<\/p>\n Crypto\u2019s developer ecosystem is continuing to expand globally, with 74% of developers outside of North America<\/a>, according to Maria Shen, general partner at Electric Capital. As a result, the share of U.S. blockchain active developers declined to 24% last year, down from 40% in 2017, and fell 5% from the previous year, according to the firm\u2019s 2023 developer report<\/a>.<\/p>\n \u201cI think the message that has been sent is that it\u2019s really complicated to do business in the U.S.,\u201d Peirce said. \u201cSo a lot of people are looking elsewhere or looking to just do something different, and I think that\u2019s problematic.\u201d<\/p>\n If there aren\u2019t clear rules, it makes it harder for both startups and regulators to sort through what\u2019s good versus bad \u201cby the book,\u201d she added.<\/p>\n \u201cPeople spend a lot of time spinning their wheels thinking about regulation, which they could spend thinking about what real things could be done with the technology,\u201d Peirce said.<\/p>\n She joked that it would be \u201cvery optimistic\u201d to assume there\u2019s a \u201cnew day dawning at the SEC\u201d after the agency approved 11 spot bitcoin ETF issuers last month. But on the flip side, she added, \u201cWe need to be ready to go when that day happens.\u201d<\/p>\n This story was inspired by an episode of TechCrunch\u2019s podcast Chain Reaction. Subscribe<\/a> to Chain Reaction on Apple Podcasts<\/a>, Spotify<\/a> or your favorite pod platform to hear more stories and tips from the entrepreneurs building today\u2019s most innovative companies.<\/em><\/p>\n Connect with us:<\/strong><\/p>\n\n