Uyeda mentioned that the SEC has a tradition of working with product sponsors to develop customized registration requirements. He sees no reason for digital asset securities to be an exception.
American attorney and revered Commissioner of the US Securities and Exchange Commission (SEC) Mark Uyeda believes the regulator needs a more specific registration process for digital assets securities. During a fireside chat at Tuesday’s Korea Blockchain Week 2024 event in Seoul, South Korea, he asked that a defined S-1 registration form be curated for this group of cryptocurrencies.
Are Cryptocurrencies Classified as Securities?
Ordinarily, United States issuers file an S-1 form with the SEC just before they list a new securities product. BlackRock Inc (NYSE: BLK), Fidelity Investments, Grayscale Investments, and the other Bitcoin and Ethereum ETF issuers made this filing before receiving approval from the Commission earlier this year. This registration encompasses several disclosures, including income and cash flow statements.
To support his argument, Uyeda cited registered index-linked annuities. He discussed how the regulator’s current standard registration form may not suffice for certain financial products. He further acknowledged that the SEC has a tradition of working with product sponsors to develop customized registration requirements. Uyeda sees no reason for digital asset securities to be an exception.
He lauded the SEC’s dominion, claiming that the agency has the flexibility to develop this tailored registration for crypto securities. The SEC Commissioner further explained that the regulator is not convenient enough to create a “catch-22 situation.” Notably, this situation involves the agency asking digital asset securities sponsors to register and provide disclosures that are either irrelevant or that they are not able to.
The subject of what qualifies as a security is still widely debated. While digital asset-based securities like tokenized bonds or crypto ETFs fall under the SEC’s supervision, there is still much uncertainty about whether cryptocurrencies are classified as investment contracts.
Key Industry Players Reject SEC’s ‘Crypto Asset Security’ Term
Uyeda’s speech comes only about a day after Ripple CLO Stuart Alderoty weighed in on a filing from the SEC regarding the FTX restructuring and repayment plan. The exchange plans to pay creditors in cash or US dollar-pegged stablecoins. The US SEC challenged this aspect of the FTX proposed repayment plan. The markets regulator warned the collapsed crypto exchange against repaying creditors using stablecoins or other “crypto asset securities”.
Alderoty noted on X that the term ‘crypto asset security’ is fabricated by the SEC and has no legal basis.
The term 'crypto asset security' is nowhere to be found in any statute—it's a fabricated term with no legal basis. The SEC needs to stop trying to deceive judges by using it. pic.twitter.com/CyNbUbeoYM
— Stuart Alderoty (@s_alderoty) September 2, 2024
Similarly, Coinbase CLO Paul Grewal cited the SEC’s statement and expressed his frustration with the regulator’s lack of clear guidance in its approach. The Coinbase executive suggested that the SEC’s actions harm the interests of the wider crypto community.
In his opinion, investors, consumers, and the general crypto market deserve a much better system. Many key industry players in the administration of the SEC share this opinion.
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