Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission (SEC), has introduced the concept of a “cross-border sandbox” for cryptocurrency companies. This innovative sandbox initiative would enable businesses in both the United States and the United Kingdom to engage in specific activities under regulatory supervision for a designated period of two years. Peirce's proposal was prompted by a consultation paper from the Bank of England and the Financial Conduct Authority, outlining the creation of a “Digital Securities Sandbox” (DSS). In her statement on Wednesday, Peirce emphasized the importance of establishing a cross-border sandbox to fulfill the objectives of the DSS and cater to the needs of investors, market players, and regulatory bodies.

Peirce, often dubbed as the “crypto mother” due to her favorable stance towards cryptocurrencies, has been proactive in suggesting regulatory strategies for the crypto industry. In a previous initiative in 2020, she put forward a three-year “safe harbor period” intended to allow innovators to launch blockchain-based projects without mandatory registration and compliance with specific federal securities regulations. As part of the proposed “micro-innovation sandbox,” the SEC would compile a list of “eligible activities” following public feedback. Peirce also mentioned the establishment of “monetary ceilings” by the institution.

The rationale behind implementing these ceilings, as per Peirce, is to ensure that participants reach a sufficient scale to assess the market response to their products or services. This approach aims to identify areas for enhancement while upholding investor protection and market integrity. Companies enrolled in the sandbox will be obliged to adhere to anti-fraud provisions. Participants can engage in the sandbox for a two-year period, provided they abide by designated “customer limitations” and monetary restrictions. Throughout this timeframe, firms will collaborate with the Commission and its personnel to secure a no-action letter or exemption order for their operations, as suggested by Peirce.

*Disclaimer: This content does not constitute investment advice.