The Cost of Not Engaging Regulators

The regulators are in ascendance, and anyone who started the year doubting the reason for, or extent of, the SEC's or the CFTC's oversight of digital asset markets should, by now, have been disabused.

In early 2018, SEC Commissioner Jackson astutely observed that "If you want to know what our markets would look like with no securities regulation, what it would look like if the SEC didn't do its job? The answer is the ICO market." True to form, as winter set in, the SEC brought 18 actions in 2018.

While the SEC has been the most active digital asset regulator in 2018, it's not as if other regulators have ceded the field.

The SEC Division of Enforcement's expertise is just that - enforcement of the securities laws.

For now the most public player at the SEC has been the Division of Enforcement, and it has systematically worked its way through the areas overseen by other Divisions, ticking off market participants one by one.

In 2018, the SEC pointed out a lot of things crypto market participants should not do, but it also suggested affirmative steps for compliance-oriented players.

FinHub's stated purpose is to facilitate public engagement with the SEC on, among other issues, digital assets and related matters-precisely what we've advocated for above.

In the EtherDelta order, the SEC noted that it opted not to "Impose a greater penalty" on Zachary Coburn in light of his "Efforts [to] facilitate[] the [SEC's] investigation involving an emerging technology." The SEC's technical competence was on full display in the order.

The SEC is signaling that the Seaboard Report is still alive and well, and applicable to the digital asset space.

At the moment, among other things, the SEC is not only requesting comment on potential changes to Securities Act Rule 701, which provides an exemption from registration for securities issued by private companies pursuant to compensatory arrangements - an area of obvious relevance to digital asset companies that seek to compensate employees, service providers, and ecosystem participants with native digital asset securities - but also on how it can reduce burdens on reporting companies associated with quarterly reporting.