SEC Commissioner Peirce: Ten major tasks for the future of the encryption working group

Author: SEC Commissioner Hester M. Peirce; Translation: Deng Tong,

When I was a child, my family used to travel from Ohio to Maine and back every year. It was a different time. If the car broke down, there was no phone to call for help. We relied on paper maps and written directions instead of smartphone apps giving us step-by-step instructions. Forget booking hotels online; you just had to look for signs in the distance and then pull over to see if there were vacancies. There were no podcasts or audiobooks, just a noisy radio struggling to find a local station. My brothers and I weren’t watching videos on screens in the back; we were scanning license plates on passing cars, “collecting” states in a technology-free road trip game. Road trips today are very different. In most ways, technology has made them a more enjoyable and less risky activity.

The newly announced cryptocurrency working group [1] should start a cryptocurrency journey that is equally more interesting and less risky than the commission’s leadership of the industry in the past decade. In the last journey, the commission refused to use the regulatory tools at its disposal and kept tapping the enforcement brakes as it staggered along a winding path with no destination in sight. But just as modern technology cannot eliminate the risks of taking the open road, this new journey towards regulatory clarity still carries dangers, and both the commission and the public need to remain vigilant and aware of the potential risks and opportunities. I am pleased to have an excellent team of talented SEC staff accompanying me on this journey, and we look forward to engaging with many enthusiastic members of the public who will help us move forward on this journey. With all this help, I hope that we can reach a better place than we imagined in our previous cryptocurrency journey. Before I discuss the hopes and opportunities represented by the working group, let me first make some important disclaimers.

First of all, although I am currently entrusted with the leadership of the new cryptocurrency working group at the SEC, the views I express only represent my personal views as a commissioner and do not represent the views of the SEC or my fellow commissioners. Commissioner positions always require commission votes.

Second, it took us a long time to get into trouble, and it takes some time to get out of it. For more than a decade, the committee has been involved in the cryptocurrency industry in various forms. The first Bitcoin exchange trading product application appeared in front of us in 2013, and in the same year, the committee filed a fraud case related to cryptographic elements. [2] In 2017, we released a 21(a) report on the DAO, which reflected the first application of Howey Test in this context. [3] Since then, many enforcement actions have been taken, many letters of inaction, some exemptions, endless discussions on cryptocurrencies in speeches and statements, numerous meetings with cryptocurrency entrepreneurs, many inter-agency and international cryptocurrency working groups, discussions on certain aspects of cryptocurrencies in rulemaking proposals, consideration of cryptocurrency-related issues in registration statements and other documents, and approval of many rule changes proposed by SRO to list cryptocurrency exchange trading products. During this time, the committee’s handling of cryptocurrencies has been characterized by legal imprecision and commercial impracticality. Therefore, many cases are still in the litigation stage, many rules are still in the proposal stage, and many market participants are still in an uncertain state. It will take time to determine the best way to solve all these problems, including ongoing litigation. This will involve the work of the entire institution and cooperation with other regulatory agencies. Please be patient. The working group hopes to achieve good results, but we need to do this in an orderly, practical, and lawful manner.

Third, the working group hopes to go to a place where people can freely experiment and build interesting things, and where it will not become a haven for fraudsters. One of the reasons why the US capital market is so strong, efficient, and effective is that we have established rules designed to protect investors and market integrity, and we enforce these rules. We do not tolerate liars, cheats, and scammers. As the working group strives to help formulate this regulatory framework, it will carefully consider anti-fraud protection measures. If the committee finds that fraudulent behavior is beyond our jurisdiction, it can refer the matter to sister regulatory agencies. If it does not fall within the jurisdiction of any regulatory agency, the committee can report this loophole to Congress.

Fourth, the working group is working to help create a regulatory framework that can achieve the committee’s important regulatory goals, including protecting investors, while maintaining the industry’s ability to provide products and services. This framework will be within the statutory authority of the committee, and we will collaborate with other regulatory agencies operating within their statutory authority. Existing regulations do not allow for free competition of products within our jurisdiction. Congress has set parameters and the committee will apply them. Congress has also granted us exemptions, which the committee will use as appropriate. If Congress directs the committee to impose requirements on market participants, SEC rules will not allow you to do as you please anytime, anywhere. Some of these rules will bring costs and other compliance burdens, which may be frustrating for some, and the committee will use its enforcement tools when necessary to pursue violations.

Fifth, the committee staff are working hard to handle requests for exemptions, letters of non-action, and registration statements, but an increase in the number may pose challenges. Compliance with technical and legal requirements, sound legal analysis, and comprehensive and timely responses to staff inquiries help save committee resources and achieve clearer regulatory objectives more quickly and smoothly. As usual, this diligence will help applications go through the approval process more smoothly; conversely, a lack of such diligence may result in unnecessary delays. Being the first to enter does not mean being the first to exit.

Sixth, the new commitment to a better regulatory environment should not be seen as an endorsement of any cryptocurrency or token. Regardless of whether these tokens or tokens are within our jurisdiction, the Commission will not endorse any product or service; there is no SEC stamp of approval or the like. It is easy to issue tokens. If people want to buy tokens or products that lack a clear long-term value proposition, they should be free to buy them, but if prices fall one day, they should not be surprised. In this country, people usually have the right to make decisions for themselves, but the same beautiful American expectation that comes with this beautiful American freedom is that people must make their own decisions, not expect the government to tell them what to do or not to do, and not expect the government to bail them out when they do something bad.

Now, after presenting these rather rough disclaimers, let’s talk about the work the working group is doing in collaboration with the staff of various policy departments of the committee. We will cooperate with the federal government, state securities regulators, and international peers. We invite builders, enthusiasts, and skeptics to discuss what the final rules should be and what interim measures may help promote innovation during this period. The committee staff has achieved a milestone - the revocation of Staff Accounting Bulletin 121 - but there is still much work to be done. This list is not exhaustive, nor is it listed in order of priority or expected completion order.

Security status: The status of encrypted assets under securities law is the basis for addressing many other issues. The working group is working hard to study different types of encrypted assets.

Scope Definition: The working group will make efforts to help determine areas that are not within the jurisdiction of the committee. As a first step, staff welcome requests for letters of no action. Letters of no action typically take the form of a statement by staff, indicating that they will not recommend enforcement action to the committee based on the specific circumstances outlined in the letter. The statement is specific to the particular circumstances but provides a useful window into staff thinking for the benefit of the general public.

Tokens and Token Issuance: The working group is also considering the possibility of suggesting the committee to take action to provide temporary forward-looking and retroactive relief for token or token issuance, providing certain specific information to the issuing entity or other entities willing to take responsibility, keeping the information updated, and agreeing not to challenge the jurisdiction of the committee when fraud allegations related to asset purchases and sales occur. These tokens will be treated as non-securities, so there is no uncertainty about whether they can trade freely in the secondary market not registered with the SEC, as long as the information remains current and accurate. This approach will bridge this gap until more permanent rules or legislation are established. It will provide a path for existing tokens to navigate out of the uncertainty fog on the vague viable path and encourage more information disclosure.

Registration and issuance: The working group will consider collaborating with staff to propose committee modifications to existing registration pathways, including Regulation A and crowdfunding, to provide interested individuals with a viable route for token issuance registration.

Special Purpose Broker-Dealers: The working group will explore potential updates to the non-action statement regarding special purpose broker-dealers, which has not been successful in its current form. Preliminary changes we may consider recommending include expanding the statement to cover broker-dealers that custody both crypto asset securities and non-securities crypto assets. We will work with the public to identify other registration barriers.

Custody solution for investment advisors: We will work with investment advisors to provide an appropriate regulatory framework, within which advisors can safely, legally, and effectively self-custody or third-party-custody client assets.

Cryptocurrency lending and collateral: We need to clarify whether cryptocurrency lending and collateral plans are subject to securities laws, and if so, how they are regulated. We plan to work hard to help solve how to make such plans comply with the law.

Cryptocurrency exchange trading products: The committee has received a proposed rule change from the SRO to list new types of cryptocurrency exchange trading products. The working group will work with staff to provide clear statements on the methods used to approve or reject these applications. The working group will also assist staff and the committee in considering requests to modify certain features of existing exchange trading products, including allowing collateral and physical creation and redemption. However, before these changes can be implemented, the committee may need to make progress on custody and other issues.

Clearing institutions and transfer agents: The working group also plans to study the intersection of cryptocurrency with the rules of clearing institutions and transfer agents. We will continue to cooperate with market participants who are interested in tokenizing securities or modernizing traditional financial markets through blockchain technology.

Cross-border Sandbox: Many cryptocurrency projects are international in nature. The working group is considering how to promote cross-border experiments within a limited scale and temporary time frame, and it may adopt a more enduring, longer-term approach.

This brief overview of how the working group views the future journey is not detailed or specific, but I hope it will pique your interest. Despite the many obstacles we face in formulating reasonable and clear rules, the journey will be exciting and beneficial if we collaborate. This is the beginning of a conversation - we don’t want to just talk to ourselves.

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[4] Press Release, ‘SEC Crypto 2.0: Acting Chair Uyeda Announces Formation of New Cryptography Working Group’, January 21, 2025,

[1] Press Release, ‘SEC Charges Texas Man in Bitcoin-denominated Ponzi Scheme,’ July 23, 2013,

[2] The U.S. Securities and Exchange Commission, pursuant to Section 21[3]a( of the Securities Exchange Act of 1934, Report of Investigation: The DAO, Release No. 81207 (July 25, 2017),

) Staff Accounting Announcement No. 122,