Last week, the United States Securities and Exchange Commission (SEC) encryption working group intensified its research on how public block chain technology supports the issuance and trading of monetized securities.
The group held separate meetings with NASDAQ, Plume Network and Etheliaize to discuss how to issue and trade securities on the public block chain.
The concept of regulating sandboxes was introduced at all three meetings.
NASDAQ has urged the establishment of digital asset-friendly sites.
According to the meeting log of 21 May, Nazdaq urged the Working Group to continue to be bound by the existing registration rules for monetized stocks, bonds and exchange funds (ETF).
In addition, they requested authorization for a new “ATS-Digital” site, where the company could list a digital asset investment contract and a commercial token.
The exchange operator also requested the regulator and the Commodity Futures Trading Commission (CFTC) to create a joint safe haven for uncertain assets.
The idea, often referred to as “regulating sandboxes”, would allow issuers to self-certify classifications while meeting the stringent disclosure criteria. In April, SEC Commissioner Mark Uyeda expressed support for this effort.
NASDAQ added that monetization should not weaken the protection of national market systems and that any initiative to achieve atomic settlement must balance liquidity with operational risk.
Plume Advocacy for the Market Box
Plume Network, based on Arbitrum, informed the United States Securities and Exchange Commission at its meeting on 22 May that the unlicensed block chain is the most appropriate asset monetization for the real world. In addition, they proposed a regulatory sandbox covering securities of 1933 and the Trade Act of 1934.
The company's agenda calls for safe harbour relief, with explicit consideration of decentralizing financial mechanisms and “credible neutrality”, as well as tools for calibrating key products and secondary trading rules on the chain.
In a brief meeting log, Plume also sought guidance on the monetization of United States and non-United States shares subject to regulatory national market and other regimes.
Etherealize seeks a comprehensive reform of the transit agency rules
The company Etherealize and Policy, MetaLeX, which focused on back-office infrastructure, told the Working Group that traditional transfer agency regulations forced the issuer to maintain parallel sub-chain books and denied the efficiency of the block chain.
The transfer agent is a financial institution that acts as a record keeper of shareholders in the company.
Their proposal required the SEC to recognize an appropriately secure block chain as an authoritative share register, to exempt the use of the depositary agent of the issuer of the decentrization agreement from registration and to create a fast track for agents specializing in tokenization securities.
They also urged pilot projects to test smart contract equivalents for corporate behaviour (e.g. dividends distribution and shareholder voting).
During the meeting, industry participants urged the development of clear classifications, modularization rulebooks and phased pilots.
In addition, each article calls for technology-specific adjustments, but does not challenge the core investor protection mandate of the SEC.
The Working Group staff heard information in the recommendations indicating that future proposals for rules might weigh the sandbox model, the dedicated trading space and the updated obligations of transfer agents.