US Crypto Regulation Needs a Hard Fork

These simple modifications to the SEC’s current regulatory framework for crypto asset issuance, staking, custody and trading can foster greater innovation without relying on new acts of Congress, says Willkie’s Mike Selig.

At the heart of every blockchain network is a “consensus mechanism,” or system of rules designed to align participants in updating the network’s state. From time to time, participants must opt in to a modification to these rules, known as “hard fork,” or else remain on a legacy version of the network.

With a change in administration forthcoming, the Securities and Exchange Commission (SEC) has an opportunity to institute a hard fork of its own with respect to its approach to crypto regulation. Although legislation is necessary to establish a fulsome legal framework for crypto, the SEC can abandon its regulation-by-enforcement playbook in favor of a pro-innovation regulatory framework that scales to accommodate novel markets.