SEC Names New Senior Advisor to Oversee Crypto Regulation

The U.S. Securities and Exchange Commission (SEC) has created a new senior advisory position to oversee securities regulation of the crypto sphere, according to a press release published today, June 4.

Ms. Valerie A. Szczepanik has been named Senior Advisor for Digital Assets, as well as Associate Director of the Division of Corporation Finance. She will be tasked with “coordinat[ing] efforts across all SEC Divisions and Offices regarding the application of U.S. securities laws to emerging digital asset technologies and innovations, including Initial Coin Offerings (ICOs) and cryptocurrencies.”  

Formerly the head of the SEC’s distributed ledger group, Szczepanik recently participated in the Consensus blockchain conference in New York, and was quoted as saying that “if you want [the crypto] industry to flourish, protection of investors should be at the forefront.”

In her official statement today, Szczepanik struck a similar note, saying she would use the new role “to facilitate capital formation, promote fair, orderly, and efficient markets, and protect investors, particularly Main Street investors.”

In his response to today’s appointment, SEC Chairman Jay Clayton said that Szczepanik was “the right person to coordinate our efforts in this dynamic area that has both promise and risk.”  

The SEC considers cryptocurrencies to be securities, which brings them under the purview of its jurisdiction. According to the 70 year old Howey Test, a security involves the investment of money in a common enterprise, in which the investor expects profits primarily from others' efforts.

During February’s US SEC and CFTC senate hearing, Chairman Clayton stressed that while every ICO token the SEC has seen so far is considered a security, a distinction should be made between tokens and major cryptocurrencies such as Bitcoin and Ethereum. The latter has reportedly been a subject of debate among US regulators, some of whom contend that Ethereum is a security. Were such a determination to be made, its 2014 ICO would constitute an unregistered security offering.

The SEC continues to raise concerns about ICOs, conducting a sweeping probe in February 2018, in which it issued subpoenas to force the closure of a number of “unregistered securities” in the ICO space. Most recently, the organization has concentrated its efforts on educating investors about potential risks, creating a website for a fake ICO that was designed to imitate the classic “red flags” of fraudulent token sales.