As a new leadership is set to take the helm at the US Securities and Exchange Commission (SEC), the DeFi Education Fund, a crypto advocacy group, is seizing the opportunity to resurrect a proposal originally introduced in 2020. The group is calling for the establishment of a “safe harbor” for token issuers – a concept first suggested by Commissioner Hester Peirce five years ago.
The proposed safe harbor would offer token issuers a temporary exemption from registration, allowing them the necessary leeway to develop their decentralized networks. According to Peirce’s 2020 speech, “The safe harbor protects token purchasers by requiring disclosures tailored to their needs, preserving the application of the antifraud provisions of the securities laws, and giving them an ability to participate in networks of interest to them.”
On Friday, a letter was dispatched to the SEC Crypto Task Force—established earlier this year to assess the applicability of securities laws to digital assets—by DeFi Education Fund’s executive director and chief legal officer, Amanda Tuminelli. In it, Tuminelli expressed the group’s endorsement of Peirce’s safe harbor concept and suggested enhancements.
Tuminelli argues that a safe harbor would provide a secure environment for projects to operate “while the long-term legislation and regulatory processes play out.” She emphasized that Congress should be the entity to tackle “broader market structure and jurisdictional issues.”
As for the formulation of regulations and policies for the proposed safe harbor, Tuminelli advises that these should remain “technologically-agnostic.”
In the letter, she states, “Given the vital role that the SEC plays in the U.S. economy and the fact that securities markets are constantly evolving due to ongoing innovation, the Commission must be wary of mandating specific, prescriptive requirements or formats that are unsuitable for new or emerging technologies.”
The DeFi Education Fund proposes that to qualify for the safe harbor, companies should either be decentralized or demonstrate an intention to become so, and should be able to pass an “exit test.”
As the crypto industry continues to evolve, the call for a safe harbor could offer a secure pathway for innovative projects to develop, while ensuring investor protection. The DeFi Education Fund’s proposal offers a potential solution that balances the need for regulatory oversight with the dynamic nature of the digital asset landscape. How the new SEC leadership responds will undoubtedly have a significant impact on the future of the crypto industry.
