SEC crypto policy makers to hear input from all sides Friday

What they're saying: "The Task Force is working to assess the different types of crypto assets and determine their status under the federal securities laws," the SEC's Crypto Task Force Chair Hester Peirce tells Axios, via a spokesperson.

• "The roundtable is critical to this work ... as the diverse views of the roundtable panelists are proffered and debated."

Policy specifics

Expect a pointed discussion around the SEC's central mission, especially in investor protection.

• "Retail investors deserve disclosures about the risks of the crypto assets that they are being told should be part of their investment portfolio," said Benjamin Schiffrin, of the left-leaning financial oversight nonprofit Better Markets.
• While Schiffrin and another panelist, BakerHostetler's Teresa Goody Guillén, may not see the industry the same, the same spirit — around disclosure, risk transparency and fairness — is reflected in her "10 commandments" for securities law.

Industry representatives have been more in the weeds in their submissions, focusing on policy suggestions where they believe gray areas exist.

• For example, a16z's legal team wrote a proposal on ways normal people can earn tokens, specifically around incentive-based rewards and airdrops.
• And Delphi Ventures general counsel Sarah Brennan proposed a safe harbor for assets designed to power a fully decentralized enterprise.

Zoom out: In a paper from three attorneys, including Brennan, industry reps argue to the task force that investor protection should focus on large operations, such as exchanges, that dominate the space, rather than the startups issuing tokens.

• "Solving for risks created by large market actors addresses contagion risk and does so in a much healthier way than engaging in 'asset-specific' discriminatory policies," they argue.

Step-by-step process

The rulemaking process can begin like this, with an open public process where they gather perspectives, such as Friday's round table.

• Then there should be a proposed rule, a public comment period and a final rule.
• Each of these steps can take a long time. Lots of departments get involved.

The big picture: Regulations are built on laws. They are the detailed rules that the executive branch writes based on the direction Congress dictates through lawmaking.

Zoom out: The three attorneys also ask that industry critics take a break from "assuming the calls for regulatory clarity are disingenuous" and, instead, "start to talk seriously about potential solutions that could serve regulatory goals and the common good."

What we're watching: Boring bureaucratic things.

• There's no regulatory clarity until the realities of digital asset companies are reflected in the day-to-day business of compliance — such as the forms and reports required by the SEC.

Friction point: Meanwhile, everyone expects Congress to eventually wade into these same waters, taking on the question of what's under the SEC's jurisdiction here (and the CFTC's, for that matter).

• Which could lead to revisions in any rules issued soon.

The other side: "I must admit that whole endeavor seems performative and intended to justify a predetermined outcome," Lee Reiners, a fellow at Duke University wrote in his testimony.

• He suggests that the agency has already made decisions about what to permit.
• As evidence, he points to the decision by the agency to back out of multiple cases it had brought against crypto companies, including ones that included serious allegations of market manipulation.

The bottom line: Tomorrow, the process begins.

• "We want to eliminate fraud and position the US to lead the world in crypto. This roundtable is another step in that direction," Rep. Bryan Steil (R.-Wisc.), chair of a subcommittee focused on digital assets, told Axios.