As part of its ongoing efforts to come to grips with the role for securities regulation in the crypto sector, staff of the U.S. Securities and Exchange Commission (SEC) issued guidance detailing how firms can create crypto wallets without triggering the broker registration requirements.
Staff of the SEC’s division of trading and markets published a statement setting out their latest views on the potential application of federal securities laws to the creation of certain investor “interfaces” — such as websites, browser extensions and mobile apps — that enable users to engage in crypto transactions in self-custodial wallets.
The statement details the steps that providers of these interfaces can take to avoid triggering the broker registration requirements — including that they don’t solicit investors to engage in specific transactions, don’t seek to control investor decision-making, and provide certain disclosures, among other conditions.
The regulator called the guidance “an interim step” while it considers various regulatory issues in the crypto sector.
In a statement, commissioner Hester Peirce said, “While the staff expressing its view is helpful, I favour a more permanent regulatory approach that addresses the broker definition in light of current market circumstances.”
To that end, she said that the SEC needs feedback to inform future rule making in this area.
“Crypto is forcing the commission to confront its inner demons that have driven it toward ever more expansive readings of the securities laws,” she said, noting that recent enforcement actions and other regulatory activity has “contorted the term ‘broker’ beyond recognition.”
“People have shown great ingenuity in developing crypto wallets and front ends that serve users well,” she added. “It would be a shame if investors in crypto asset securities transactions were unable to use these tools because of an overly broad reading of the term ‘broker’.”
In the meantime, the SEC’s new guidance will be considered in effect for the next five years.