The North American Securities Administrators Association (NASAA) has issued “principles” for the Securities and Exchange Commission (SEC) on the regulation of digital assets, or crypto.
NASAA is the entity that represents all state and provincial securities regulators across the continent.
At times in the past, NASAA has been behind the curve or fought a pyrrhic battle. Today, in recognition that new rules targeting the digital asset sector are forthcoming, the association has decided to accept the inevitable while providing its input on how the top securities regulator should proceed. The document is in response to SEC Commissioner Hester Peirce’s recent missive entitled “There Must Be Some Way Out of Here.”
Peirce, a long-time supporter of Fintech innovation and the need for updated crypto rules, is leading the regulatory charge to address the shortfall in crypto regulation at the SEC.
In an eleven-page document, NASAA asks the SEC to adhere to the following principles:
- Investor protection must be the central part of any proposed regulation.
- Robust disclosures must be simple enough for novice investors to understand the risks of buying and trading crypto-assets and should be available on a trusted site administered by a regulator.
- Exemptive frameworks for crypto-assets and businesses are better than jurisdictional exclusions because they can be tailored and adjusted as circumstances change.
- State antifraud and examination authorities must be preserved.
The big one is the issue of criminal activity and fraud. No one wants to see nefarious activity in any segment of the financial services industry. The last administration fell asleep at the wheel, ignoring the need for updated rules to provide additional protection for investors. NASAA wants to be certain it maintains its ability to pursue fraudulent activity within its own jurisdiction. To date, there have been no declarations that states may be excluded from the enforcement process.
NASAA concludes:
“However, so long as the Task Force maintains a focus on solutions that protect investors, including robust disclosures and the preservation of antifraud authorities, it can pursue innovation in a way that is safe and confidence-boosting for investors and the markets.”
