Why the SEC’s Framework for Digital Assets Leaves More Questions than Answers

July 25, 2019

In this segment, Dina Ellis Rochkind, Of Counsel, Paul Hastings, discusses why the SEC’s recently published framework for digital assets leaves more questions than answers.


Dara Albright: What is your opinion of the recently proposed SEC’s framework for digital assets?
Dina Ellis Rochind: The SEC overall has done a great job of trying to balance the need for innovation with the need for protecting investors. But in this case, yes, the framework that the SEC staff put out is in plainer English than other documents it has put out. However, it leaves more questions than answers, which is the same thing that Commissioner Hester Pierce (aka Crypto Mom) says. And the reason I say that is that there are two places very prominently in that framework that talk about a security morphing into a product or good, which leaves you with this notion of how do I do that? So the question is, does the SEC have that morphing in there for remediation purposes to do no action letters, or is the SEC looking forward and saying actually there are securities that can turn them to goods or services?

If there are securities that could turn into goods or services, it seems that we would need a new disclosure regime so that investors know exactly what they are getting upfront. And I always talk about how over two years ago I got into the space and I had crypto and distributed ledger blockchain clients. I want to understand it a bit. I didn't wipe out my retirement savings, but I did buy. One of the things I bought was one ethereum. And at the time I didn't know if I had equity in the infrastructure of ethereum or I had one ethereum? Because if I had equity in the infrastructure of ethereum, it's the largest blockchain out there and probably is not going away. Nonetheless, at the end of the day, I just have one ethereum.

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