NEWS
Hester Peirce, a Republican commissioner at the U.S. Securities and Exchange Commission (SEC), has suggested the establishment of a “cross-border sandbox” between the United States and the United Kingdom. This initiative would allow crypto firms to conduct specific activities under regulatory supervision for a duration of two years.
Peirce put forward this proposal in response to a consultation paper from the Bank of England and the Financial Conduct Authority (FCA) regarding the creation of a “Digital Securities Sandbox.”
It’s worth noting that Peirce clarified that her comments were personal opinions and did not represent the official stance of the SEC.
This isn’t the first time Peirce has offered solutions for regulating the crypto industry. In 2020, she proposed a three-year “safe harbor period” to facilitate the development of blockchain-based digital projects without the need for registration or compliance with certain federal securities laws.
Under Peirce’s suggested framework for the “micro-innovation sandbox,” the SEC would compile a list of “eligible activities” based on public input. Additionally, the agency would establish “monetary ceilings” to ensure that participants can assess market reactions and identify areas for improvement while maintaining investor protection and market integrity.
Participants in the sandbox would be subject to anti-fraud provisions, and they could remain in the program for two years, provided they adhere to “customer limitations” or monetary caps, according to Peirce.
During this two-year period, firms would collaborate with the Commission and its staff to obtain a no-action letter or exemptive order for their activities. Peirce proposed that the Commission staff could extend sandbox eligibility for an additional year for firms actively pursuing a no-action letter or an exemptive order. However, the ultimate aim of the micro-innovation sandbox is to transition to more permanent relief within two years.
Peirce emphasized that by participating in the same regulatory sandbox, firms in the U.S. and the UK could operate under consistent rules, potentially stimulating cross-border innovation.
The UK’s digital securities sandbox was initially suggested as part of the government’s Financial Services and Markets Act 2023 (FSMA). Following a review period, the bank and FCA intend to provide a response to the submitted comments. Subsequently, the sandbox will be open for applications during the summer of 2024.
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