Commissioner Peirce’s comments on crypto regulation were praised by Cathy Yoon, though apprehension was expressed regarding the concept of a regulatory sandbox proposed by Peirce.
The Securities and Exchange Commission has initiated a significant shift in crypto policy, amplifying the influence of voices like Commissioner Hester M. Peirce. However, some believe her supportive stance on crypto comes with notable limitations.
Cathy Yoon, General Counsel at Wormhole Foundation, recently addressed Commissioner Peirce’s remarks. While she agreed on the need for regulatory exemptions in the crypto space, Yoon criticized Peirce’s proposal for a regulatory sandbox.
Importantly, the discussion centers on tokenized securities, which fall under the SEC’s regulatory authority. Any form of security must strictly comply with regulatory standards before the agency grants approval. Nonetheless, experts expect significant challenges ahead.
Yoon Cautions Against Regulatory Sandboxes Despite Theoretical Appeal
Commissioner Peirce has highlighted ongoing technical limitations as a major barrier, emphasizing the lack of sufficient technical infrastructure. Yoon acknowledged this point and considered it a strong justification for granting regulatory exemptions to projects involving tokenized securities.
“The infrastructure needed to support tokenized securities is still rather undeveloped and expensive to implement,” Yoon, Wormhole.
Nevertheless, Yoon noted that she disagrees with Peirce’s longstanding advocacy for a regulatory sandbox. This concept involves granting startups the ability to experiment with products that currently operate within an uncertain regulatory framework.
Regulators oversee these companies while allowing them to benefit from reduced compliance obligations and face fewer penalties. However, Yoon contends that although regulatory sandboxes may appear beneficial in concept, they carry potential risks, including inconsistent enforcement and preferential treatment.
“A sandbox is only as good as the leeway and support a regulator offers to the sandbox participants. There is also a concern that regulators may favor sandbox participants, leading to biased oversight or even weakened enforcement in the long term,” Yoon, Wormhole.
Rather than endorsing a regulatory sandbox, Yoon proposed a limited-duration regulatory exemption. This approach would permit companies to trial their products in real-world settings, enabling better adaptation to practical conditions and more efficient scaling.
