This One SEC Meeting Could Reshape Crypto Regulation Worldwide

The U.S. Securities and Exchange Commission’s (SEC) Crypto Task Force ramped up efforts to evaluate how public blockchains could serve as a foundation for the issuance and trading of tokenized securities.

The Task Force had separate talks with Nasdaq, Arbitrum-based Plume Network and Etherealize, mostly discussing the rules needed to bring digital assets into standard financial markets. Throughout the three meetings, it was clear that everyone was advocating for a regulatory sandbox to allow for innovation and continue to look after investors.

Nasdaq Calls for SEC and CFTC Collaboration

On May 21, Nasdaq executives urged that tokenized shares, bonds and ETFs be kept under the same registration rules. Yet, they suggested the development of a new “ATS-Digital” platform that can list both investment contracts for digital assets and commodity-like tokens.

The exchange operator encouraged the SEC and CFTC to come together and clear up regulatory rules for digital assets whose status is still unclear. Industry sources explain that this structure would give issuers the opportunity to classify their own assets under less stringent disclosure standards.

Nasdaq also made it clear in its meeting notes that any changes to improve atomic settlement must not endanger current market protections and must consider the effects on operational risk.

Plume Proposes Sandbox for DeFi Compliance Testing

Plume Network explained in a May 22 session that permissionless public blockchains can handle the tokenization of real-world assets. The project suggests a sandbox where the unique workings of DeFi are examined under the requirements of both the 1933 Securities Act and the 1934 Exchange Act.

Plume proposed that safe harbor should be designed for decentralized systems, by adopting viewpoint neutrality and drawing a line between primary token sales and future secondary market trades on blockchains.

The startup intended to launch tokenization for both American and international stocks and hoped for clarity from regulators about Regulation NMS’ rules for fair and efficient markets.

SEC Urged to Recognize Blockchain Share Ledgers

At the same time, blockchain company Etherealize and policy partner MetaLeX highlighted that outdated rules for transfer agents necessitate the existence of two shareholder record systems, making blockchain less efficient.

Theproposal requested that blockchain networks are considered valid systems for share registration, that decentralized companies be excused from needing traditional transfer agents and that there be a special procedure for approving tokenization agents.

It also pushed for the use of smart contracts for important business acts, especially dividends and voting, so that legacy foundations could be advanced with easier solutions. Though opinions among the participants differed about technology, all approved of the SEC’s focus on investor protection and did not dispute its main principles. 

SEC Commissioner Signals Support for Sandboxes

Simultaneously, they all supported the development of a clear classification for digital assets, strong and flexible rulebooks, and test programs that gradually introduce new infrastructure. Earlier, SEC Commissioner Mark Uyeda expressed openness to sandbox-style regulation, suggesting the SEC may be leaning toward it.

The Task Force has reviewed each of the submitted proposals. No new rules have been issued, but people close to the situation say that regulations could soon adopt sandboxes, specialized markets, and fresh definitions of transfer agencies suited to the Internet era.

Conclusion

The SEC’s Crypto Task Force is now required to develop rules for tokenized securities moving forward. Current backing for the use of regulatory sandboxes and blockchain integration could lead to brand new trading platforms that still protect investors. Regulators may be about to embrace changes that support technology and flexibility.

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FAQs

1. What is the SEC Crypto Task Force studying?

It’s exploring how public blockchains can support tokenized securities issuance and trading.

2. What is a regulatory sandbox?

It’s a test environment with relaxed rules for safely experimenting with tokenized assets and DeFi systems.

3. What did Nasdaq propose?

Nasdaq suggested keeping current rules, launching a digital trading venue, and creating a safe harbor with the CFTC.

4. What did Plume and Etherealize recommend?

Plume pushed for DeFi-friendly sandboxes. Etherealize proposed using blockchains for shared registers and smart contract tools.

Glossary of Key Terms

SEC: U.S. agency regulating securities markets and protecting investors.

Crypto Task Force: SEC team focused on crypto and blockchain rules.

Tokenized Securities: Traditional assets like shares are represented on a blockchain.

Regulatory Sandbox: Testing space with relaxed rules for new financial tech.

Nasdaq: Major U.S. stock exchange.

CFTC: U.S. agency regulating futures, derivatives, and some digital assets.

Atomic Settlement: Instant, simultaneous trade settlement.

DeFi: Blockchain-based finance without central intermediaries.

1933 & 1934 Acts: U.S. laws regulating securities issuance and trading.

Reference

www.sec.gov