Carolyn Crenshaw, a commissioner with the US Securities and Exchange Commission (SEC), said the “safe harbor” proposal would have exacerbated problems seen during the initial coin offering (ICO) boom in 2017 and 2018.
Crenshaw made the remarks during the annual “SEC Speaks” event this month, and posted her speech on the SEC website on October 12. The commissioner says the impact on investors and markets would have been much greater if the safe harbor provisions had been applied. in time:
I think the results would have been worse for investors and the markets. ICOs and other digital asset offerings have raised billions from investors, but most of them did not deliver on their promises. Investors suffered losses.
“And I think it’s no coincidence that these problematic offerings preceded and persisted during the beginning of a multi-year decline in the value of digital assets, sometimes known as crypto winter,” she added.
The safe haven proposal has been advocated by Crypto-Friendly Securities and Exchange Commission Commissioner Hester Pierce. The proposal seeks to give network developers a three-year grace period to build a decentralized network without fear of SEC legal action, but it has not been adopted by most of the other commissioners.
Peirce, or “Crypto Mom,” rolled out a revised version earlier this year in March. Cointelegraph reported on October 5 that North Carolina House Representative Patrick McHenry also introduced a three-year safe harbor proposal in the Digital Tokens Act of 2021 draft Clarity Act.
Crenshaw argues that rather than push the crypto sector toward compliance, the safe haven proposal would expose investors’ capital to more risk as crypto tokens would be considered outside the SEC’s jurisdiction for “several years.”
“I am also concerned that relaxing regulatory requirements in markets prone to investor protection failures, limited compensation options for investors due to no pseudonyms and no mediation, and market manipulation, cannot maintain investor confidence or result in sustained broad adoption,” she said.
Related: Gensler Confirms SEC Won’t Ban Cryptocurrencies… But Congress Can
Instead of a safe haven, Crenshaw called for a “bridge” in which token issuers and other crypto firms would work with the SEC to develop plans for regulatory compliance, or discuss specific exemptions when deemed “appropriate”:
“I believe that if market participants accept proactive responsibility for compliance, we can build a bridge that fosters innovation while maintaining market integrity and providing investor protections needed for the growth of these new markets.”
“If you are likely to be within our jurisdiction, work with us to describe your plan for compliance or explain why certain exemptions are appropriate,” she added.
Crenshaw’s comments also reflect the sentiments of President Gary Gensler, who has regularly called on crypto firms to work with the Securities and Exchange Commission and register with the regulator.