In a statement published February 4th titled “The Journey Begins,” SEC Commissioner Hester Peirce, as the newly appointed SEC Crypto Task Force leader, compares the SEC’s past crypto regulation to a chaotic road trip and expresses her desire to create a clearer, more practical regulatory framework.
She also asserts that the Commission will uphold its authority and enforce regulations without being pressured or overridden. From the statement:
“Third, the Task Force wants to travel to a destination where people have great freedom to experiment and build interesting things, and which will not be a haven for fraudsters. One of the reasons the U.S. capital markets are so robust, efficient, and effective is that we have rules designed to protect investors and the integrity of the marketplace, and we enforce those rules. We do not tolerate liars, cheaters, and scammers.”
“Where Congress has directed the Commission to impose requirements on market participants, SEC rules will not let you do whatever you want, whenever you want, however you want. Some of these rules will impose costs and other compliance burdens that some may find irritating, and the Commission will use its enforcement tools when necessary to pursue noncompliance.”
Go Commissioner Peirce!
She outlines 10 areas for the Task Force. One of them could directly impact our industry -- regulated investment crowdfunding:
#4: Registered Offerings: The Task Force will consider working with staff to recommend that the Commission modify existing paths to registration, including Regulation A and crowdfunding, so that people interested in registering token offerings will have a viable path for doing so.
I applaud the Commissioner’s clear outline and approach … however, I don’t think it’s going to be an easy journey.
As backdrop, President Trump signed an executive order for the White House to create a Working Group on the same topic and it will be led by an “AI & Crypto Czar” (David Sacks).
Fact Sheet:
Executive Order:
The Working Group already has marching orders and a clear timeline from President Trump:
- Within 30 days (i.e., by February 22, 2025), relevant agencies must identify all regulations affecting the digital asset sector.
- Within 60 days (i.e., by March 24, 2025), agencies must submit recommendations on whether to rescind, modify, or adopt those regulations.
- Within 180 days (i.e., by July 22, 2025), the working group must submit a report with regulatory and legislative proposals that advance the order’s policies.
Getting regulatory clarity for crypto will be a good thing. And despite the industry’s heavy PR push otherwise, I think most American’s still see crypto as a casino. And why not? It’s an industry that has been repeatedly plagued with rugs pulls and pump & dumps. From FTX to the Hawk Tuah coin, it’s an industry where some participants refer to most of the ~10,000 crypto assets listed on CoinMarketCap.com affectionately as “shit coins” -- and where shady practices have been the norm.
But don’t take my word for it, look at the statement by one of the leading web3 and crypto investors from one of the most respected VC firms in Silicon Valley.
Venture capitalist Shaun Maguire (Sequoia Capital) stated in a June 2022 tweet, “95% of Web3 is a scam but the future lives in that other 5%.”
It’s an incredible admission in a moment of candor by someone in an industry that did extremely well hyping crypto investments and then leaving retail investors holding the bag when things crashed. There are ~10,000 listings on CoinMarketCap.com and over 8,500+ companies or campaigns that have raised money under regulation investment crowdfunding. The number of fraud cases under crowdfunding can be counted on one hand (if that many).
Regulated Investment Crowdfunding: 5 bad apples / 8,500 issuers or campaigns
vs.
Crypto/web3: 9,500 shit coins / 10,000 projects (according to Shaun Maguire’s 95% estimate).
Therefore, I hope the Commission will warrant EXTREME CAUTION when considering the rules in the crypto space.
I am encouraged by a recent opinion piece by Kristin Smith, the CEO of Blockchain Association (a Washington DC-based trade association representing more than 100 of the industry’s leading companies).
https://www.coindesk.com/opinion/2025/01/31/a-blueprint-for-crypto-market-structure
In her OpEd titled “A Blueprint for Crypto Market Structure”, she wrote:
“We're not asking for special treatment or regulatory carve-outs. Instead, we're proposing clear rules of the road that protect consumers.”
This is great to hear! The participants in the Regulated Investment Crowdfunding industry work extremely hard to follow the rules and protect consumers -- so it’s a relief to know that the crypto industry isn’t trying to create a regulatory fast lane or shortcut to reach retail investors. I hope that the White House Working Group, the SEC Task Force, and other stakeholders hold them to this promise.
I also hope that their members will stick to it as well. I note that one of their members, a16zcrypto (https://theblockchainassociation.org/membership/) is forging ahead with lots of ideas and recommendations for what the Commission should be doing. A lot of their writings make their case that old rules shouldn’t apply to the unique nature of crypto (computer code). But they have shown some willingness to make suggestions around existing exemptions like crowdfunding. From their list of suggestions:
https://a16zcrypto.com/posts/article/sec-digital-age/
- "Modify crowdfunding rules for exempt offerings
The SEC should revise Regulation Crowdfunding rules to more effectively regulate exempt offerings for crypto assets.
The current limits on capital raising and investor participation in crowdfunding campaigns are ill-suited for crypto startups, which often need a broader distribution of crypto assets to develop a critical mass and network effects for their platforms, applications, or protocols.
What to do:
- Expand offering limits: Increase the maximum amount that can be raised through crowdfunding to a level consistent with the needs of ventures (e.g., up to $75 million or a percentage of the overall network, depending on the depth of disclosures).
- Exempt offerings: Allow crypto projects to rely on exemptions similar to Regulation D while leveraging the crowdfunding platform’s accessibility to reach more broadly beyond accredited investors.
- Protect investors: Adopt appropriate safeguards such as caps on the amounts any one individual may invest (as Reg A+ currently does) and robust disclosure requirements that encompass the material information relevant to the crypto venture — something present regulations do not address. (For example, while offering disclosures may often address matters such as directors, their compensation, and shareholding details, disclosures around the underlying blockchain, its governance, and consensus mechanisms may be more important for investors in crypto assets.) Tailoring these requirements to digital asset investors can ensure they are well-informed and protected from fraud.
These changes would empower early-stage crypto projects to access a wide pool of investors, democratizing access to promising investment opportunities while preserving transparency."
+++
In the “Journey Begins,” Commissioner Peirce emphasizes collaboration with regulators, industry participants, and the public, inviting engagement to develop effective and transparent policies. It’s great that all stakeholders will have a chance to weigh in.
The Crowdfunding Professional Association (CfPA), the leading voice of the regulated investment crowdfunding industry in the US and an organization that I Co-Chair in 2025, will be meeting to prepare our recommendations as it relates to the overlap of crowdfunding and crypto. We’re a consensus-driven association and we vote on policy recommendations -- so not all the ideas of our members will be reflected in our recommendations and some of our members may not agree with the association’s recommendations.
From my perspective, and as a guiding principle, I agree with Kristin Smith that the crypto industry shouldn’t receive special treatment or regulatory carve-outs. Likewise, crowdfunding shouldn’t be retrofitted solely to accommodate the crypto industry’s interests. Existing operators in the space have deep expertise and have been working hard to innovate and comply with regulations on behalf of investors, issuers, and intermediaries. Instead, any discussions about modifying Regulated Investment Crowdfunding (Reg CF and Reg A) should also focus on improving the framework for current industry participants, not just the "new entrants".
Finally, I’d invite representatives of the crypto industry to consider joining the CfPA so that your voices can be heard. We’re a friendly bunch.
#CfPAcrypto
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