Securities Lawyer Explains the SEC's Regulation Crypto Asset Guidance & Why it's so Important! | Tiffany Smith

**Tiffany Smith** (0:00)
Even if you didn't comply with the first parts of Red Crypto, the startup or the fundraising exemption. And so what that means is existing projects today can qualify for that safe harbor so that they can say, hey, everyone should feel comfortable purchasing our asset because it's not in security.

**Tony Edward** (0:24)
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Hey, folks, welcome into The Thinking Crypto Podcast. I'm your host, Tony Edward, and joining me is Tiffany Smith, who is a partner and co-chair of the Blockchain & Cryptocurrency Working Group at WilmerHale. Tiffany, it's great to have you back.

**Tiffany Smith** (3:00)
Thanks for having me, Tony.

**Tony Edward** (3:01)
Yeah, Tiffany, we were talking before the recording. I had to get you back on because we had an in-depth conversation back in May about the SEC and crypto legislation and guidance, and recently, the SEC provided regulation crypto for comments, and we touched on that in our interview. So I definitely want to get your take and your perspective, which you're a plethora of experience with securities law and much more. So why don't we kick it off with that? Tell us about the SEC's guidance and what was your initial reaction to that?

**Tiffany Smith** (3:32)
So at a high level, so it's called Red Crypto. At a high level, it provides an offering exemption for crypto assets that are subject to an investment contract.
So it has some of the framework that Commissioner Purce had laid out years ago. And so the question is, if you have an investment contract, if you have a crypto assets that's subject to an investment contract, it's first like how is it registered? Is there a fit for purpose exemption from registration? And number two, how you determine when the investment contract is over and it's no longer subject to the federal securities laws. And that is exactly what this proposed Red Crypto does.

**Tony Edward** (4:13)
I don't know if you got a chance to go through all the details because you let me know, but what was the good for you and what was maybe the bad if there's anything like that?

**Tiffany Smith** (4:22)
So, I mean, the good is that we frankly have like a fit for purpose regime for crypto asset offerings. I think we talked about this before because we didn't have anything in the US. What was happening were two different things. One, the crypto asset offerings were limited to accredited investors. And so, that's kind of like anti-crypto, right? It's supposed to be every man and little man can participate. And so, we had this regime where only accredited investors in the US could participate. And then the second thing was that a lot of projects were going offshore to raise capital, which was basically taking US investors out of the, you know, away from having the ability to participate in these distributions or these offerings. And so, this proposed regulation is a fix to that.