The Securities and Exchange Commission’s (SEC) Crypto Task Force is on a crusade. Led by Commissioner Hester Peirce, they are pursuing a consolidated regulatory regime for digital assets and even mulling a merger with the Commodity Futures Trading Commission (CFTC). The issues task force is diving deep into those pivotal issues right away. Their main themes are investor protection, regulatory clarity, and the fact that the world of crypto trading platforms has changed.

In January, SEC Acting Chairman Mark Uyeda announced the creation of a Crypto Task Force. Its mission should be to work towards a cohesive and comprehensive regulatory framework for the burgeoning digital asset industry. The task force is actively engaging with industry participants through a series of roundtables to gather insights and diverse perspectives.

The first roundtable, held on March 21 and titled "How We Got Here and How We Get Out – Defining Security Status," focused on defining the status of digital assets. The second, on April 11, titled "Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading," addressed the unique challenges of regulating crypto trading platforms. The next roundtable is scheduled for April 25, titled "Know Your Custodian: Key Considerations for Crypto Custody".

One of those voices has been Commissioner Hester Peirce, widely known as “crypto mom,” one of the industry’s strongest proponents. At the moment, she chairs the Crypto Task Force. She and her colleagues are asking some very hard questions. Specifically, they are attempting to clarify which aspects of the burgeoning digital asset industry should fall within the SEC’s purview.

The SEC and CFTC have both expressed interest in regulating digital assets. There's increasing concern that there might be dangerous overlap and conflict between the two agencies. Richard Johnson, CEO and Founder of Texture Capital, enthusiastically endorses the idea of combining the two agencies. This action would reduce duplication in regulation and provide much-needed clarity across the industry.

The regulatory divide created by the Financial Innovation and Technology for the 21st Century (FIT21) Act is under consideration. This bill seeks to provide more clarity on the roles of the SEC and CFTC in regulating digital assets. It has prompted concern over potential new loopholes and the threat of regulatory arbitrage.

Many have been looking for clarity from the SEC on digital assets.

While the Commission works to develop a long-term solution to address these issues, a time-limited, conditional exemptive relief framework for registrants and non-registrants could allow for greater innovation with blockchain technology within the United States in the near term. - Mark Uyeda

I encourage market participants that are developing new ways to trade securities using blockchain technology to provide input on where exemptive relief may be appropriate. - Mark Uyeda

As Commissioner Caroline Crenshaw stated, there is a real risk that investors will be confused about what protections exist if the crypto platforms are able to create these facades.

Crypto trading platforms are unique because, among other reasons, they often perform multiple services under one roof, sometimes including brokerage, clearing, and custody. - Caroline Crenshaw

She highlighted that this creates a "high risk of conflicts of interest and risks for investors".

Regulatory clarity is critically important, according to Dave Lauer, a crypto advocate and former Wall Street trader. He thinks coordination or cooperation is key to safeguarding investors and the market’s integrity.

I have found that the turf warfare, the infighting, the constant question of who should be regulating what has caused investor harm directly. - Dave Lauer

in some instances, we have seen those risks materialize in a way that has caused significant market disruption and harm to investors. - Dave Lauer

The SEC’s new Crypto Task Force is hard at work examining these issues of paramount importance. They are committed to creating a regulatory environment that encourages innovation, protects investors, and maintains fair, orderly, and efficient markets.

We should consider whether there may be a more efficient method of regulation. - Mark Uyeda