Today, we’re excited to announce the appointment of Jay Clayton, former chairman of the Security and Exchange Commission, to the Fireblocks advisory board. Clayton brings unparalleled capital markets and regulatory expertise to Fireblocks as a member of the company’s Advisory Board and will help Fireblocks and its customers navigate the evolving market and regulatory dynamics affecting the development and deployment of solutions for the emerging digital asset infrastructure.
Clayton joins Fireblocks’ Cryptography Advisor, Ran Cannetti, along with Cyberstarts founder Gili Raanan, Tenaya Capital’s Tom Banahan, Capitolis’ Gil Mendelzis, Paradigm’s Fred Ehrsam, and Stripes’ Ken Fox on the seven-member board.
Fireblocks has emerged as a leader in the evolving digital asset space. The scope of the company’s vision to improve the digital asset infrastructure and security is impressive. I share Fireblocks view that digital asset custody requires the same level of service as traditional custody while also striving for better regulatory outcomes in security, certainty, and resiliency. I appreciate the company’s commitment to improving all aspects of the custody and transfer ecosystem and the team’s level of engagement with industry incumbents who have robust legal and compliance infrastructure as well as assisting new entrants in the space.
A coordinated approach to digital asset regulation
Clayton was among the first SEC Chairpersons to carefully consider the status of digital assets within the context of the U.S. securities law framework.
In a June 6th op-ed in the Wall Street Journal, Clayton and former Undersecretary of the Treasury, Brent McIntosh, cautioned policy makers against the risk of both overregulation and underregulation of cryptocurrencies, while recommending lawmakers use a “function-based” approach to apply existing financial regulations to new financial technologies.
“Existing regulatory frameworks provide the tools to address many of the risks of new technologies without stifling their promise,” Clayton and McIntosh wrote. “If applying these frameworks reveals outdated requirements, such as a mandate to use paper records or other outmoded technologies, including for governmental functions such as recording mortgages and security interests, then regulators should remove them.”
Clayton observed that the regulatory community is evolving toward a function-based approach to oversight and enforcement.
Speaking generally, Clayton observed that three categories of people tend to emerge in response to any new technology:
Three categories of crypto participants
Incumbents. According to Clayton, there are the incumbents who may want to resist the rise of new technologies.
Challengers. Then, there are the challengers who claim that the new technology is so promising that it’s adoption should not be impeded and regulatory frameworks should yield. According to Clayton, this approach works every once in a while, particularly when existing regulation is outdated or ineffective, but it certainly shouldn’t happen in financial services because it’s systemically important and generally highly effective.
Users. The last category are the users of the technology; the users cover a wide spectrum of perspectives but generally skew more conservative. What many want to know is, “Does the technology work well and am I safe from a regulatory point of view?” According to Clayton, in the digital asset space, we should evolve toward a state of affairs the users can be comfortable from a functional as well as a regulatory point of view while using digital assets – especially if we marry these concepts by implementing a function-based approach to regulation as opposed to a form-based one.
Fireblocks as the “E-ZPass” for your digital asset journey
When it comes to how Fireblocks fits into the broader digital asset journey, Clayton views the platform as striving to provide productivity and efficiency enhancements in the core of the digital asset infrastructure.
“I think the technology has a chance to be part of a step change in terms of eliminating frictions and enhancing performance, including regulatory performance,” Clayton said. “It’s like replacing hand-to-hand toll-takers and coin baskets with E-ZPass – we don’t even think about it anymore. But I can’t imagine what the efficiency savings from E-ZPass are just in terms of hours saved for people.”
The digital asset industry outlook
“I think the field of opportunities for bringing new technologies to our financial markets is amazingly wide and deep,” Clayton said. “If you just look at all of the securities transactions where loans are packaged – credit card loans, student loans, mortgages or anywhere else where there’s document intensity and physical processes — there must be room for improved performance for all participants. ”
Instead of everyone lining up at the toll booths in order to pay and get their assets and distributions, assets and funds can move through the agreed processes without stopping, said Clayton, referring to the E-ZPass analogy.
To learn more about how Fireblocks is paving the way for regulated financial institutions to enter the digital asset space, read this article, and get to know our Global Regulatory Compliance team here.
