¶ Intro
Hey everyone.
I'm Tony Edward and I'm Amanda Wickcraft and we.
Are recording at the Salona Policy Institute's summit and joining US is Land and Zenda, who is the counsel to the Truman and senior advisor for the Crypto Task Force at the SEC.
Landon. Great to have you. Thank you for having me Landon.
We're recording this on a day the SEC made some big announcements. Can you tell us about that and the details around it?
Yeah, I like every SEC employee need to start with a kind of a disclaimer, and I thought i'd be a little bit educational about it. The Securities and Exchange Commission is a commission. It really only acts by the votes of the commissioners, and so I am just a staffer at the SEC. I do not speak on behalf of the commission. But yeah, today, what day is it?
¶ SEC Crypto Wallets
Monday?
The Division of Trade Markets issued a statement clarifying certain circumstances under which certain wallets, interfaces and front ends that trade crypto that if they were to trade token is Securities would not have to register as a broker at the Securities.
And Exchange Commission. So it's a big deal.
It talks about transaction based compensation, which is typically a big factor in broker regulation. Even if these interfaces take that commission compensation, these things act more like tools for the user. They allow them to execute their own decisions and make decisions for themselves, and they just relay those messages to the blockchain. And so the staff is making a big statement that these things don't have to register.
You are obviously an advisor for the Crypto Task Force.
¶ Crypto task force
Tell us a bit about the task force and a mission there.
Yeah, so the task force is about fifteen staffers at the Securities Exchange Commission US, the commission dedicated to creating pathways and regulations for crypto at the SEC and up today, we've issued a number of statements clarifying security status of different things like meme coins, stable coins, proof of work,
proof of stake. The Commission itself issued an interpretation about two weeks ago, trying to provide as much clarity as they could as to win tokens our securities and when they're not And that was probably one of the biggest actions that the staff myself was at least partially helpful and working towards. But that was a commission statement, meaning that is official Commission position. So win things are securities and when they're not, and so it's a really organic group.
We do not lead the policy that comes from the other staff themselves in like this the statement today on interfaces, but it's really ground up trying to have the entire Commission catch up and get up to speed on crypto and establish good regulatory pathways for compliance and for not securities registration when appropriate.
Can you give us a little bit about your background and also, while we know your title, what that exactly entails at the SEC?
Yeah, my title is very long. I guess I just say I'm a crypto staffer at the SEC. I worked for Hester Purce. I also work for the chairman, and so it's a kind of dual hat just doing crypto policy for them. Prior, I spent six years working for Representative Tom Emmer in the House doing a lot of his crypto policy. The Blockchain Regulatory Certainty Act is a very relevant bill right now in market structure negotiations helped
drop that for him. Went on to go work at the Senate Banking Committee for Senator to me working on crypto, doing some early stable coin legislation, and then went to Coin Center, which is a think tank in DC dedicated to individual liberty, protecting people's rights to write and publish code. And from there interacted with Commissioner Pursus Staff and Commissioner Judas, the third Commissioner at the SEC, and they brought me
along to join the task force. And it's a it's an amazing time to work at the Commission.
Yeah, the SEC is.
Doing an amazing job. There's so many rulemaking and guidelines have been put forth. One that Chirp Paul Atkins recently you talked about was rage crypto for fundraising. That seems he's going to be a pretty impactful one. What can you tell us about that?
Yeah, so we we the Commission issued the interpretation about how they look at the Howie test and when certain tokens are or on not securities. The next step in that process, which the Chairman outlined somewhat is rege crypto and it's it's you know, the community can kind of think of it as hester Purson's safe harbor, the thing she's been talking about for at least five years now. How do you how do you do a fundraising in crypto?
You know, potentially comply with some disclosures. If you're doing a securities offering, but at some point, you know, disseminate control, decentralize, you know, however, you want to put it such that you're no longer in charge of this project, project, you're no longer providing the essential managerial efforts that are necessary, and and when is a safe harbor appropriate to make it clear you're not a security anymore. So the Chairman talked about that that is really the only thing that's
public at this point. So I'd point everyone to his his statement. But that's been a you know, a thing that the commissioner person has been talking about for years.
When can we expect some uh, some clarity around or guidance on tokenization?
On tokenization, Yeah, so Congress recently had a hearing on tokenization in the House. We are thinking very deeply about tokenization. The staff, just like the staff put out a statement today on UH interfaces have in George's brokers. The staff of several different divisions of the sec put out a statement about a month ago talking about the different ways to tokenize securities. You could do it from the issue where you could have third party issuers. It could carry
along all the rights like a stock. It could not like just give you, you know, a representation of what the stock is worth. There's different ways to tokenize that, and the staff is thinking very deeply along about how how to classify those things when registration is appropriate. There's also been a lot of talk about a innovation exemption, which is essentially, how do you trade tokenized stocks on
automated market makers? How do you, you know, use your wallet like the staff talked about today, which may not be a broker to trade a stock on, you know, an automated market maker, something that may not even be an exchange itself. You're really just using your wallet to transact yourself with someone else. So the innovation exemption will, at least as contemplated, will provide an exemption for folks who want to create liquidity polls to trade stocks on amms.
Following that innovation exemption, I think the Commission will think a lot about what sort of rules need to change, what sort of flexibility should happen to make sure that this sort of stock trading and other securities trading can happen in the future, and what rules are appropriate, what rules should should be tailored for this type of trading.
And with the rule making that's being put forth, how will that fit into CLARITIAC or it doesn't necessarily have to go in the CLARIAC claritiac fully it can just be referenced as far as the title of the rule making is that kind of the dynamic.
There's a lot of distinctions at the SEC between rule making, exemptive authority staff statements. I did my disclaimer at the beginning. There's a lot of like nuance that now that I'm at the SEC, I very much appreciate. But technically we have not done rulemaking up until this point. It has been a series of staff statements commission interpretations as to what is the existing law. Commissioners have talked about doing rule making, and I you could expect something like that in the future, but.
We're doing a lot of things that that.
Are very similar to legislation, that are in tandemal with legislation. The commissioners who are in charge of the Commission very much support market structure, and so you know, we're talking to the same people that go into Congress and talk about the Clarity Act.
We're trying to harmonize.
Between US and the CFTC as much as possible, and you know, they do support legislation win and if legislation becomes law, we will fully implement it and try to, you know, provide as much flexibility as we can. So I'd say these things are complementary rather than opposed to each other. And we talk with Congress all the time about what we're working on, how this relates to Clarity Act, and ultimately we do support that becoming law.
When do you think the Clarity Act might pass?
I mentioned my history having been in Congress for quite a while. It's an arduous process. There's one hundred and one year to one of five hundred and thirty five different people that have to get this across the finish line. It's it's tough, but I know a lot of very smart, brilliant staffers and members working on this, and they're really pursuing, you know, as altruistically as they can. How do you create a good how do you compromise in creating a
regulatory pathway for these things? And so there's a lot of good people doing a lot of honest work just trying to get this across the finish line, and we're doing what we can to support them.
Well. Landon This has been super informative. Thank you so much for joining us.
Absolutely thanks for the time.
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