SEC Appoints First Ever Cryptocurrency Senior Advisor

As discussion continues circling around the potential for cryptocurrencies to become regulated, the U.S. Securities Exchange Commission (SEC) has officially appointed its first senior advisor to its digital currency division.

Announced on Monday (June 4), the agency said in the release that Valerie A. Szczepanik will assume the role as associate director of the division of corporation finance and senior advisor for digital assets and innovation–a position that before Monday didn’t exist.

The purpose of the role will be to work with all SEC divisions and offices for applications of US securities laws to “emerging” digital asset technologies such as initial coin offerings and cryptocurrencies.

Szczepanik joined the SEC since 1997 and has most recently acted as an assistant director in the division of enforcement’s cyber unit. SEC Chairman Jay Clayton said in the announcement that Szczepanik has the experience and “keen awareness of the importance of fostering innovation while insuring investor protection.”

“I am excited to take on this new role in support of the SEC’s efforts to address digital assets and innovation as it carries out its mission to facilitate capital formation, promote fair, orderly, and efficient markets, and protect investors, particularly Main Street investors,” Szczepanik said in the release.

Over the course of the year, the SEC hasn’t shied away from investigating companies that began dabbling with blockchain or who have added “blockchain” to their company titles. In fact, the agency issued a statement in January following a speech at the Securities Regulation Institute warning about these kinds of companies.

Clayton said:

I want to raise one more narrow, distributed ledger or “blockchain”-related legal issue by means of a hypothetical. I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like “Blockchain-R-Us,” and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved.

SEC Chairman Clayton further added that the SEC would be taking a closer look at the disclosures of public companies that change their business models to blockchain and whether or not those would comply with securities laws.

Since then, companies like Riot Blockchain (NASDAQ:RIOT), former NASDAQ-listed Longfin (OTCMKTS:LFIN), and also formerly-listed NASDAQ Long Blockchain (OTCMKTS:LBCC) have all come under siege by the SEC due to questionable business practices and stock manipulation.

As it relates to initial coin offering schemes, as recent as May 29 the SEC obtained a court order against Titanium Blockchain which raised over US$21 million between November 2017 and January 2018 for a potential initial coin offering fraud. Prior to that, the SEC launched a mock ICO website to educate investors on “all too good to be true investment” opportunities.

In short, the agency has been making attempts to determine what the best regulation practices are for the cryptocurrency and blockchain industries, which could be a reason behind Szczepanik’s position although the agency hasn’t directly made that clear.

Clayton said in Monday’s announcement that Szczepanik is “the right person” to coordinate the agency’s efforts in the cryptocurrency space that “has both promise and risk.”

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.