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BTC Pulse 2025-05-10 20:47:00

SEC’s Hester Peirce Calls for Crypto Sandbox, But Wormhole’s Legal Chief Pushes Back

SEC’s Peirce Renews Call for Crypto Sandbox SEC Commissioner Hester M. Peirce has renewed her call for a regulatory sandbox for the crypto industry. One of the most pro-innovation voices at the commission, Peirce has long argued for lighter frameworks to allow blockchain startups to build products without immediate regulatory fallout. Amid growing interest in tokenized securities and decentralized infrastructure, Peirce suggested a sandbox could help provide a bridge between innovation and compliance. Wormhole’s Cathy Yoon: Sandboxes Present Severe Risks Cathy Yoon, General Counsel at Wormhole Foundation, greeted Peirce’s remarks with qualified agreement. While she recognized the necessity to eliminate regulatory obstacles for new crypto projects, she rang alarm bells on the sandbox concept. “The infrastructure that would be needed to support tokenized securities is still relatively underdeveloped and expensive to put in place,” said Yoon, echoing Peirce’s call for some exemptions to be useful. But she scoffed at the idea of a regulatory sandbox as the right vehicle. Biased Enforcement a Core Concern Yoon warned that regulatory sandboxes, while valuable in theory, could turn into arbitrary decision-making and regulatory bias. “A sandbox is only as good as the flexibility and support a regulator offers,” she said. “There is also a danger that regulators will be too nice to sandbox participants, leading to biased supervision or even weaker enforcement further down the road.” These are reflective of broader industry skepticism on whether regulators can run sandboxes without undermining fair competition or creating confusion on compliance expectations. An Alternative: Temporary Exemptions Rather than pursuing Peirce’s sandbox concept, Yoon suggested an alternative—temporary regulatory exemptions. These would allow companies to operate in live environments within a predetermined timeframe, while still being subject to broader SEC supervision. She argued this structure would foster innovation without compromising regulatory integrity. The Way Forward As the SEC continues to rebalance its strategy towards digital assets, voices like Peirce’s and Yoon’s call out the balance between innovation and oversight. Whether through sandboxes or exemptions from frameworks, the future of crypto regulation could depend on how these recommendations are translated into actionable policy.

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