US SEC Commissioner Eyes Bermuda’s Regulatory Framework for Cryptocurrencies

Speaking before the SUSS Convergence Forum in Singapore last week, U.S. Securities and Exchange Commissioner Hester Peirce highlighted Bermuda among several countries that are tackling tough questions concerning cryptocurrency regulations.

Commissioner Peirce, hailed as “Crypto Mom” for her pro-crypto stance, made her remarks during a discussion entitled “Inclusive Blockchain, Finance, and Emerging Technologies”. While Peirce indicated that the SEC has “not be sitting idle”, she pointed to regulatory frameworks in Malta, Switzerland, France, Japan, Hong Kong, Thailand and Bermuda that are laying the groundwork for the rest of the world.

Bermuda, in particular, has attracted Boston-based crypto firm Circle which recently moved its subsidiary, cryptocurrency exchange Poloniex, to its jurisdiction, specifically because of its regulatory framework concerning the custody of digital assets and due to a lack of clear regulations in the US.

Regulators have already granted the company its Digital Assets Business Act license allowing Poloniex to operate as a fully licensed entity in Bermuda.

Says Peirce,

“Bermuda is one of the only jurisdictions to address the custody question in detail. In conjunction with a regulatory regime for digital asset businesses, the island also released draft guidance for crypto custodial services, which addresses such difficulties as how to store private keys for hot and cold storage while preserving necessary liquidity, what safeguards should be in place to prevent unauthorized access, and how to frame internal audit of transactions to ensure their integrity. 

These ‘laboratories of regulation’ operated by our international counterparts have me thinking about possible paths for the U.S. to become more welcoming of crypto innovation.”

Peirce also singled out Singapore as a leader,

“Singapore, as you likely know better than I do, has been at the forefront of much crypto-related activity, which may be attributable to the clarity it has offered to issuers in this market.”

…

“I look forward, for example, to learning more about Bermuda’s custody framework to see if we can draw from it as we think about how our custody rules apply in the crypto context. Motivated in part by the approach taken by Singapore, which does not treat every token offering as a securities offering, I would support the creation of a non-exclusive safe harbor for the offer and sale of certain tokens…

…meaning that an offering that did not meet its requirements might still comply with other of our rules, such as our private placement exemption. This concept is very preliminary and needs a lot more work, but it might be a way to ensure that the legal regime does not inadvertently choke token networks off before they get off the ground.”

Peirce says the key is to study, learn and borrow effective policies that are implemented by other countries.

“Whatever direction we go in the United States, continued communication among the world’s financial regulators will be important. While I believe a single global regulatory framework would be unwise, regulators can create a healthy environment for this new market to grow by sharing information that will smooth cross-border transactions while stamping out fraud and other harmful activity.

We also can continue to learn from one another to fill the gaps in our own regulation and borrow, when appropriate, from frameworks developed and tested in other places.”

You can check out the full speech here.

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