As we at BitOoda monitor and assess both day-to-day regulatory developments and broader trends, we would like to highlight the continued broadening of industry engagement with regulators in the form of two potentially precedent-setting proposals recently submitted to the SEC. We have previously addressed regulators’ efforts to initiate dedicated public-private engagements and analyzed the SEC’s recent efforts to clarify some aspects of token classification.
Now we note a pair of filings for two new and different types of crypto products, proposals that supplement SEC’s ongoing consideration of the first Bitcoin ETF. Arca, a Los Angeles-based digital asset manager, is seeking approval to sell a new type of stablecoin, filing a prospectus with the SEC for a bond fund with shares tokenized on the ethereum blockchain as “Arca UST Coins.” Additionally, New York-based blockchain developer Blockstack filed an offering statement to conduct a $50 million token offering using the Reg A+ framework; Blockstack claims that following SEC’s review of its preliminary offering circular, the Stacks Tokens offering would be the first SEC-qualified token offering of its kind.
We hope this signals a growing effort by industry players to “test the waters,” or alternatively to make a more concerted effort to “play by the rules” even as many of those rules remain unclear. Pegging a token to U.S. Treasury securities as a type of stablecoin, and utilizing the Regulation A+ exemption to expedite SEC review of a token offering represent new proposals that — regardless of whether they are approved — will add to the existing body of regulatory precedents, indicators, and decisions. The more regulators are “tested” with different types of proposals, the more insight we receive on how new applications and approaches will be handled and where the governance lines will be drawn.
If SEC’s continued deferral of the BTC ETF decision is any indication of how it plans to handle new types of crypto applications and filings, we could soon see its inability — or unwillingness — to quickly rule on these types of proposals. However, if it truly seeks to support U.S. innovation in this area and continue to issue clearer guidance, its response to these two filings ought to reflect that supportive approach.
Blockstack knows its Reg A+ filing could pave the way for others, stating “Recently, U.S. markets have been closed to crypto projects given regulatory uncertainty, and we believe in opening the U.S. markets to innovation in this area. … Following a regulated path and proactively working with the regulators was a decision we made with the understanding that it’ll require a lot of work and time. … This can potentially set a precedent for others in the industry.”
We welcome these new proposals, not just because of their potential to expand the overall digital asset ecosystem with new types of products, but also because of the two companies’ proactive and above-board regulatory engagement that will — regardless of the SEC’s decisions — benefit our collective understanding of the regulatory environment.