SEC Blockchain Forum Surprises

On May 31, 2019, the U.S. Securities and Exchange Commission (“SEC”) held its First Fintech Forum at its headquarters in Washington D.C. and hosted by the SEC Strategic Hub for Innovation and Financial Technology (“FinHub”). The SEC announced its agenda for the forum on April 24, 2019, stating that it intended to discuss “distributed ledger technology and digital assets.”

During the forum, a range of issues were addressed. Joshua Ashley Klayman, a managing member of Klayman LLC and panelist invited to speak at the forum, told CoinDesk

“Clearly they have been listening to what those in the community – and their counsel – have been saying to them and they’ve put a lot of effort into understanding this space,” He added, “They were very seemingly comfortable with some of the more technical aspects and the terminology, including atomic swaps. It was a much higher-level discussion than the basics of blockchain.”

Various panels addressed specific issues. For instance, one panel discussed atomic swaps, which are transactions where parties to the transaction exchange cryptocurrencies without the use of a third-party intermediary.

Further, the trade remains incomplete until both sides of the transaction are complete. In another panel, air drops and forks were addressed. Airdrops are giveaways of tokens to promote adoption, while forks are a split in cryptocurrencies that the original holder has available to him or her.

SEC officials also showed their knowledge of cryptocurrencies. For instance, Valerie Szczepanik, the SEC’s senior advisor for digital assets, discussed ethereum smart contracts and the need for more discussions between developers and the agency. She also stated,

“We need to translate between each other” and “We also learned that the federal securities laws are just as complex to computer scientists as coding smart contracts in Solidity are to regulators.”

The discussions also ventured into the issues of market manipulation, which seems to be an issue for the SEC. In Szczepanik ‘s closing remarks, she stated:

“Dalia Blass and the Division [of Investment Management] put out a comprehensive letter, two letters actually, asking for input on things like custody, manipulation, liquidity, valuation, redemption, … all those things are things we invite your input in.”

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