SEC Commissioner Hester Peirce Proposes US-UK Crypto Regulatory "Cross-Border Sandbox"

Hester Peirce, a U.S. Securities and Exchange Commission (SEC) commissioner, has proposed a "cross-border sandbox" between the U.S. and the UK, allowing crypto firms to test certain activities under regulators' oversight for a period of two years.

Peirce's proposal, outlined in a statement on Wednesday, comes in response to the Bank of England and the Financial Conduct Authority's (FCA) consultation paper on establishing a "Digital Securities Sandbox" (DSS) in the UK.

Proposed US-UK Cross-Border Crypto Sandbox

"This letter outlines one simple approach that our jurisdictions could take to implementing a cross-border sandbox," Peirce said, emphasizing the potential benefits for investors, market participants, and regulators.

The proposed "micro-innovation sandbox" would see the SEC publish a list of "eligible activities" after gathering public feedback, as well as set monetary ceilings. Firms participating in the sandbox would be subject to anti-fraud provisions and could operate within the sandbox for two years as long as they adhere to customer and monetary limitations.

During this period, firms would collaborate with the SEC and its staff to secure a no-action letter or exemptive order, aiming to secure permanent regulatory relief within the two-year timeframe.

Peirce highlights the potential of this cross-border sandbox to foster innovation, particularly in the digital asset space. "Even though I tend to be more of a beach than a sandbox type of regulator, sandboxes have proven effective in facilitating innovation in highly regulated sectors," she said.

Digital Securities Sandbox and Regulatory Collaboration

The UK's digital securities sandbox was proposed in December as part of the government's Financial Services and Markets Act 2023 (FSMA). The sandbox is expected to be open for applications in the summer of 2024 following the completion of its review period.

Peirce's proposal signifies a potential step towards greater regulatory collaboration between the U.S. and UK, which could help streamline the development of a more comprehensive and innovative digital asset landscape.