Some Silicon Valley players think they shouldn’t be subject to the same SEC oversight that others in the crypto space must endure.
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Call it arrogance, sincerity, or a little of both, but some Silicon Valley tech players think they should be exempt from any regulations and oversight from the Securities and Exchange Commission when it comes to the cryptocurrency space.
Their positions were reportedly (subscription required) voiced last month when they made a mighty journey to the SEC’s offices in Washington, D.C. Specifically, the group met with top officials of the SEC’s Division of Corporation Finance, according to the Wall Street Journal. This division is charged with regulating ICOs.
The Wall Street Journal reports that among those who showed up to make their cases were Andreessen Horowitz and Union Square Ventures.
Others who made the journey included lawyers from Cooley LLP, Perkins Coie LLP and McDermott Will & Emery LLP. Alobbyist from the National Venture Capital Association also made the journey, along with Union Square’s Brad Burnham and John Buttrick.
Here we’ll go over their logic, and point out the potential problems with it.
Many observers have long held the opinion that many of the outfits in Silicon Valley, California hold themselves as special, partly because of the innovative products and services they produce. Think Google and Facebook, as well as other tech startups like those related to IoT and such that have disrupted so many industries.
So indeed, these companies are special in their own rights, but should the startups from the space be exempt from the oversight of the SEC that so many other non-tech companies are subject to?
They think so.
The main argument the delegation made before the SEC was that oversight could slow innovation when it came to them making the best use of the Blockchain.
Specifically, proponents of a less intrusive SEC want startups to be able to sell tokens “broadly to investors without having to provide regulated disclosures such as financial statements and elaborate descriptions of their business,” reports the Wall Street Journal.
If fraud was suspected, the group would object, according to the Journal’s reporting.
SEC stance on crypto startups
The trip to D.C. by these Silicon Valley people came on the heels of the SEC’s chair saying that he understood the importance of not putting in place regulations that would stifle innovation in the cryptocurrency space.
SEC chair Jay Clayton, and the chair of the U.S. Commodity Futures Trade J. Christopher Giancarlo, went before members of Congress in February to school lawmakers on how they were approaching the space. Their presentations were so convincing and positive for the space that Bitcoin’s price rallied shortly afterwards.
The top regulatory officials did make it clear, however, that some types of regulations were needed to keep bad actors from running amok and ruining it for everyone.
During the discussion, the pair told the panel about how they were gingerly handling the cryptocurrency space, not only because of its newness, but also because of the unique opportunities that it presents.
They pointed out that while they hadn’t slapped extensive regulations on those operating in the space, they had put in place tools to catch the bad actors, and put an end to any criminal acts they were committing.
Both heads said they would remain diligent in rooting out the bad actors as the crypto space is expected to continue to grow.
Common sense approach
While it may seem like common sense – the need for regulations and oversight to make sure people aren’t getting ripped off by fraudsters – are Silicon Valley players above reproach when it comes to being held to the same oversight and regulatory conditions as others trying to operate in the crypto space?
Also, can they can be considered as more trustworthy than others when it comes to not ripping off investors? Can they really be trusted to operate on the up and up without SEC oversight?
Lest we forget the recent debacle with Facebook and its users’ information falling into the wrong hands.
No matter, according to the Wall Street Journal’s report, “the group wanted formal assurance from regulators that their products would be exempt from SEC oversight, arguing the tokens aren’t investments but products that can be exclusively used to access services or networks provided by startup companies.”
Many in the crypto space have agreed that oversight was needed for the crypto space to also quell the volatility. On that same note, observers worry that the newness of the space warrants more understanding of it before appropriate regulations are slapped on it.
To the Wall Street Journal, Perianne Boring, president of the Chamber of Digital Commerce, said the following:
“You can’t just start writing laws and regulations today and expect to get it right. It’s building on wet cement.”
The Journal reported the SEC’s possible response as follows:
SEC officials have privately expressed skepticism about granting such a broad exemption, the people said. The SEC is more likely to offer a limited exemption from oversight if a company’s token sale is capped at a per-investor limit and can’t be resold at a profit to third parties…
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