Speaking at the SEC’s and Rock Center’s Silicon Valley Initiative, the chair of the Securities and Exchange Commission (SEC) shed light on how the SEC is monitoring and responding to developments in the private markets, as well as the relevant fintech phenomena. Among other things, Chairwoman Mary Jo White touched upon the topic of blockchain and distributed ledger technologies.
She said that the recent and ongoing innovations in digital finance have the potential to transform how markets operate in virtually every respect—from streamlined market operations to more affordable ways to raise capital and advise clients. These innovations, in turn, necessitate appropriate measures to be taken to protect investors so as to boost their confidence in this growing and changing landscape.
Emphasizing on the potential of blockchain technology, White said that it could modernize, simplify, or even potentially replace, current trading and clearing and settlement operations.
“We are closely monitoring the proliferation of this technology and already addressing it in certain contexts”, she said, adding that Corporation Finance staff recently reviewed the registration statement of a company seeking to offer and sell digital securities, eliminating the need for intermediaries and allowing settlement on a nearly instantaneous basis.
Addressing regulatory aspects of the technology, White mentioned the Advanced Notice of Proposed Rulemaking and Concept Release on transfer agent regulations issued in December 2015, which asked for public comment on the use of blockchain technology by transfer agents and how such systems fit within federal securities regulations. She added that the insight from the comment process will help in evaluating how to best regulate these new innovations.
“One key regulatory issue is whether blockchain applications require registration under existing Commission regulatory regimes, such as those for transfer agents or clearing agencies. We are actively exploring these issues and their implications”, White said.
In her concluding remarks, she said that the SEC recognizes that the regulatory scaffolding around venture company advisers and private issuers is considerably scanter as compared to those for registered investment advisers and public companies. Companies are increasingly opting for private status, partly, as they believe it is the best environment to foster the creativity, rapid cycling of success and failures, and “disruption that is the oxygen of technological innovation.”
“We have a keen interest in ensuring that all of the applicable rules and regulations are followed and that the pressures that shape these markets do not lead to fraud and harm to investors”, White said. “And we will provide the appropriate regulatory oversight to protect investors so that they can have confidence in continuing to support the marvelous technologies for which this Valley is famous”.
