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Remarks before the Investor Advisory Committee

Dec. 2, 2021

Thank you, Jennifer [Marietta-Westberg], for chairing this committee, and thank you to Heidi [Stam] for your leadership as well. We will miss your insights and are grateful for your contributions over the years. Welcome to the new officers of the Committee and the new Disclosure Subcommittee: Christopher [Mirabile], Leslie [Van Buskirk], Brian [Hellmer], and Cambria [Allen-Ratzlaff]. I look forward to working with you in your new capacities.

Today’s meeting addresses two issues that deserve attention—elder financial abuse and crypto. With respect to the former, I am very much looking forward to the discussion about older investors’ unique susceptibility to fraud and how the SEC can help combat it.

The Investor Advisory Committee’s consideration of crypto is also much needed. Certainly, all of us in this virtual room have a shared interest in preventing people from falling prey to fraudsters peddling crypto, and, human nature being what it is, there is no shortage of such fraudsters. I expect that aspect of investor protection will be a big part of today’s discussion. Other aspects of investor protection, however, also merit consideration:

  • Regulatory Clarity. When a regulator clearly delineates rules, people trying to do the right thing can work within those rules and investors can more distinguish the fraudsters from the legitimate actors. The SEC has not provided clarity in response to repeated questions on crypto from reputable players, but has instead embraced an approach that has been described aptly to me as “strategic ambiguity.” Such an approach facilitates enforcement actions, but it is costly and treacherous for well-intentioned developers and their lawyers. This Committee, speaking for investors, can urge the Commission to tackle questions such as:
    • If a token is sold as part of an investment contract, must it always trade as a security? If so, how will that work in practice?
    • Can a platform trade crypto securities alongside traditional securities and non-securities? How would such a platform register with us?
    • Who can custody crypto and how?
    • What aspects of non-fungible token markets might implicate the securities laws?
  • Investor Access. The Commission recently took the big step of permitting bitcoin futures-based exchange-traded funds. We have yet to approve a spot exchange-traded product (“ETP”) despite many applications over the last four years. Many commentators have noted the unsatisfying reasoning the Commission has relied on in allowing bitcoin futures-based products, but prohibiting spot products. Other countries have moved ahead with spot products. Substitute products offering some level of exposure to bitcoin but usually at higher prices and without the same level of convenience have emerged in our markets. Our denials, the most recent of which the Commission issued just yesterday,[1] hint that spot products are not getting approved because we do not regulate bitcoin trading venues. Forcing investors who want exposure to crypto through traditional investment products into more expensive and less efficient wrappers is hardly the hallmark of an investor protection-focused regulatory scheme. My objections to the Commission’s approach to date are well known, but perhaps this Committee can help shine some light on the harm to investors resulting from the Commission’s refusal to allow a spot bitcoin ETP.
  • Individual Liberty. Congress has charged us with regulating the securities markets, but it has not charged us with surveilling every financial transaction or overriding investor decisions. As we regulate the crypto markets, we should be thinking about whether unique aspects of the technology—its transparency and its objective participation criteria embedded in the code—make it possible for us to regulate with a lighter hand so that people can be more free in their financial lives. People find value in using tools like stablecoins and decentralized finance (“DeFi”), so we should take care not to use regulation to force them into our comfort zone by, for example, replacing stablecoins with central bank digital currencies and DeFi with the centralized intermediaries of traditional finance.

I hope some of these themes will weave their way into your discussions, any recommendations that emerge from them, and then into our regulatory approach. Thank you to all of the members of the Committee and today’s panelists. I look forward to the discussions.

[1] Order Disapproving a Proposed Rule Change to List and Trade Shares of the WisdomTree Bitcoin Trust under BZX Rule 14.11(e)(4), Commodity-Based Trust Shares, Release No. 34-93700 (Dec. 1, 2021), available at

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