The US Securities and Exchange Commission (SEC) has designated a crypto advisor to oversee its cryptocurrency task force.
Valerie A. Szczepanik will lead the application of securities laws to “digital asset technology and innovation” across initial coin offerings (ICOs), which tend to be riddled with fraudulent activity, and cryptocurrencies in general.
Szczepanik is a cybersecurity veteran. She was the first SEC official to comment publicly on ICO projects. A year ago, she advised ICO startups to highlight investor protection if they were serious about making the industry to flourish. Her knowledge of securities laws, cybercurrency, and cybersecurity makes her the ideal leader for the SEC’s distributed ledger technology (DLT) working group.
The newly created position, officially “Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation for Division Director Bill Hinman” signals the seriousness with which the SEC is allocating resources into the cryptocurrency market. While there is currently no specific regulatory framework, the SEC is moving as quickly as it can to ensure investor safety.
SEC Chairman Jay Clayton said in a press release, “With her demonstrated skill, experience, and keen awareness of the importance of fostering innovation while ensuring investor protection, Val is the right person to coordinate our efforts in this dynamic area that has both promise and risk.”
Does this mean that regulation will be quick to follow?
No. Kathryn Haun, a member of the board of directors at Coinbase, has said that blockchain and cryptocurrency regulation is still years away. “We don’t want regulation to outpace understanding,” she cautioned. Given the extremely fast pace of blockchain development, early regulation could be obsolete by the time it’s printed. While regulation can be updated, it will still require in-depth understanding of blockchain technology and cryptocurrencies to make the best decisions.
Regulators have echoed that sentiment, citing that knee-jerk reactions and hasty regulations could significantly impede innovation and interfere with progress. ICO tokens also don’t (currently) classify as securities.
Meantime, institutional capital isn’t entering the cryptocurrency space in any significant amounts, as institutional investors wait for regulation. Some market experts predict that new regulation will be the catalyst for a market rally later in 2018.
While the institutional investors wait, the SEC is launching investigations into ICOs and cryptocurrency exchanges. Most recently, the SEC thwarted a fraudulent ICO that had already raised $21 million (the Titanium Blockchain Infrastructure Services).
An investor conference in mid-June will include a breakout session with the SEC on the future of cryptocurrencies.