Hester Pierce, the Securities and Exchange Commission (SEC) commissioner cringingly referred to as ‘crypto mom’ by some within the community, has suggested that cryptocurrency startups should be given a three year “safe harbor” where they are free from the rigors of regulatory oversight.
Pierce, who has long been an advocate of the blockchain sector, has often criticized the lack of defined regulations when it comes to crypto projects, and her grace period would allow new projects time to develop in line with the rules rather than potentially face action down the road.
The Howey Test Chestnut Still Needs Cracking
Pierce was speaking at the International Blockchain Congress in Chicago on Thursday when she made the controversial suggestion, stating that the three-year period would give new projects enough time to get themselves to a sufficient state of decentralization to escape the ever-watchful gaze of the SEC while sticking to the rules.
Crypto projects, like all financial startups, currently have to pass the Howey Test, the famous US Supreme Court assessment that dictates whether a project is considered a security or not. The assessment is notoriously hard to apply to crypto tokens, many of which are intended at as utility tokens, and is the reason why Kin founder Ted Livingston is being taken to court by the agency – Livingston hopes that by allowing a judge to decide on the matter, the status of cryptocurrencies are securities will be settled once and for all.
Pierce Can Expect Pushback
Thursday wasn’t the first time Pierce has discussed her desire to protect crypto projects in their early stages, but it represents a major step forward in making it formal policy. Of course there will be plenty of pushback, most likely from the likes of Brad Sherman, should it ever get to the state of senate debate, but there is no reason why a carefully crafted piece of legislation on the matter couldn’t satisfy all parties, especially if it helps alleviate fears that America is falling behind China in the blockchain arms race.