What the SEC’s Vision for U.S.-U.K. Crypto Unity Entails

  • SEC Commission Hester Peirce proposed a U.S. and U.K. crypto collaboration.
  • The plan is to operate real-world experiments via a sandbox arrangement. 
  • Peirce seeks blockchain-based learning opportunities for financial innovation. 

Hostility toward the crypto industry from U.S. regulators has been an ongoing theme for several years at this point, with a seeming step up in enforcement actions recently. This includes the SEC’s cases against Coinbase and Uniswap, among others.

However, with crypto becoming more of a political issue heading into the U.S. presidential race, lawmakers are increasingly siding with the industry. A prime example is the recent passing of the Financial Innovation and Technology for the 21st Century (FIT21) Act by the House of Representatives, which would formalize a legal framework for cryptocurrency in the U.S.

Riding this wave of changing political sentiment, crypto-friendly SEC Commissioner Hester Peirce posted a proposal for joint U.S. and U.K. collaboration on a digital securities sandbox (DSS). But what exactly is a DSS, and what’s the purpose behind this proposed collaboration?

SEC’s Peirce Calls For Sandbox Innovation

Commissioner Peirce’s joint U.S. and U.K. DSS proposal refers to a virtual partitioning or “sandbox” of crypto activity. The aim is to assess the effectiveness of that crypto activity in a controlled and manageable environment with a view to a wider rollout based on lessons learned during the experimental phase.

Specifically, the crypto activity Peirce proposed relates to learning more about the real-world workings of using blockchain technology for the “issuance, trading, and settlement of securities without undermining investor protection, market integrity, or financial stability.”

Peirce suggested exploring use cases like asset tokenization, improving market transparency, asset fractionalization, increasing settlement efficiency, solving interoperability issues, bolstering cybersecurity, and enhancing privacy. 

This arrangement’s benefits include helping smaller firms enter highly regulated markets, providing insights for regulators, and increasing public access to new products and services.

Peirce argued for a cross-border sandbox between the U.S. and the U.K. to yield even greater benefits and learning opportunities.

U.S. and U.K. Collaboration

Peirce stated that by running a cross-border DSS in the U.S. and U.K., participating firms could conduct the same sandbox activities under the same regulatory requirements in both jurisdictions simultaneously.

This setup would provide a viable path for smaller disruptive firms to enter highly regulated markets, giving regulators valuable insights to shape effective regulations and increase public access to new products and services.

Additionally, cross-border collaboration would generate more comprehensive data for regulators across different jurisdictions on how emerging technologies operate under real-world conditions.

The latest in the SEC vs. Ripple lawsuit sees the crypto firm fight to keep records secret.
Ripple Doubles Down with New Filing Letter in SEC Lawsuit

Data shows Bitcoin volatility is stabilizing, partly due to the effect of ETF products.
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