would only be permitted to transact orders for registered securities . It would be up to the issuer — not the dealer or exchange — to complete the registration process . But few , if any , issuers have announced plans to register their tokens with the SEC , nor are they likely to do so given the industry ' s unanimous refusal to classify tokens as securities .
Nor would it be particularly easy to do so under existing regulations . The SEC has never explained how the dealer , or the crypto-asset issuer , could make the disclosures required by the SEC under current securities laws . For example , extensive corporate governance and financial disclosures concerning the issuer are , at best , difficult to make and , at worst , wholly nonsensical when dealing with tokens governed exclusively by computer code .
And the frustration building in the crypto community is poised only to intensify . In February , the SEC announced [ 3 ] a new rule that would expand the definition of " dealer " to include certain liquidity providers . As many have pointed out , the new rule may subject decentralized finance participants — including those that provide liquidity to crypto-assets — to securities regulation .
In the end , the ShapeShift case epitomizes the SEC ' s regulation-by-enforcement approach . It underscores the pivotal role of regulators and courts — as opposed to technological innovation — in shaping the crypto industry ' s trajectory . And the ShapeShift dissent raises valid concerns : So long as the SEC is seen to favor ambiguity over clarity and adheres to outdated and incompatible rules , it risks hampering the growth of the crypto economy .
Keith E . Blackman is a partner at Bracewell LLP .
The opinions expressed are those of the author ( s ) and do not necessarily reflect the views of their employer , its clients , or Portfolio Media Inc ., or any of its or their respective affiliates . This article is for general information purposes and is not intended to be and should not be taken as legal advice .
[ 1 ] https :// www . sec . gov / files / litigation / admin / 2024 / 34-99676 . pdf . [ 2 ] https :// www . sec . gov / news / statement / peirce-uyeda-statement-a-crypto-world-turns-03-06-24 . [ 3 ] https :// www . sec . gov / news / press-release / 2024-14 .