SEC Chairman Expresses ‘Optimism’ About DLT Investment Opportunities

United States Securities and Exchange Commission (SEC) chairman Jay Clayton has said this week that he is “optimistic” that developments in distributed ledger technology (DLT) can “help facilitate capital formation.”

Speaking as part of a testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs — published on the SEC website Dec. 11 — Clayton added that DLT offers “promising investment opportunities” to institutional and retail investors alike.

Clayton’s testimony spanned various aspects of the SEC’s oversight — including its regulatory and policy agenda over the past fiscal year as well as its “new strategic plan,” and 2019 “near-term” focus.

Within this context, Clayton emphasized the agency was “focusing a significant amount of attention and resources” on Initial Coin Offerings (ICOs), distributed ledger technology (DLT) and digital assets.

In regard to his self-declared “optimism” about the investment opportunities provided by the new sector, Clayton outlined a range of the agency’s initiatives that aim to “foster innovation” and protect investors” as part of a “balanced regulatory approach.”

These include guidance from the SEC’s Corporation Finance director, Bill Hinman, on how to evaluate whether a given digital asset is deemed a security under U.S. federal law, and the appointment of an associate director (Valerie A. Szczepanik) in the same division to serve as a dedicated senior advisor for digital assets and innovation.

As part of its internal crypto regulatory coordination efforts, he noted the SEC’s creation of a dedicated Strategic Hub for Innovation and Financial Technology (FinHub) this October, which he characterized as a sign the SEC’s “door remains open to those who seek to innovate and raise capital in accordance with the law.”

Clayton made further reference to the agency’s attempt to coordinate inter-agency oversight with other regulators, and to proactively issue ongoing public statements in regard to ICOs and cryptocurrencies, most recently this November.

The agency chairman closed his discussion with a mention of the “unfortunate” case of bad actors that “prey on investors’ excitement about cryptocurrencies and ICOs to commit fraud or other violations of the federal securities laws.”

As reported earlier this week, Clayton has remarked that ICOs can be effective, but require regulation and compliance with securities laws to ensure they offer participants the same degree of investor protection as in traditional equities and fixed income markets.


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