SEC Commissioner Peirce Blasts Regulator’s Action Against Telegram

21 July 2020

U.S. Securities and Exchange Commissioner (SEC) Hester Peirce on Tuesday criticized her colleagues’ decision to penalize Telegram’s initial coin offering in remarks that underscored the maverick regulator’s open-arms approach to crypto.

  • Peirce, whose liberal fintech stances have earned her the nickname "Crypto Mom," told Blockchain Association Singapore the SEC fundamentally erred in prosecuting and punishing Telegram's gram token sale, which raised $1.2 billion in now-forfeited funds for the messaging app as per a settlement last month.
  • In her view, Telegram's decision to sell grams under a "Simple Agreement for Future Tokens" offering structure should have protected the project from securities violations. But, as she pointed out, the SEC saw it differentl, and worked to convince a court that the agreements for future gram tokens counted as securities.
  • "I do not support the message that distributing tokens inherently involves a securities transaction. What the SEC’s Telegram complaint cast as evidence of an illegal securities offering – that 'the project would require ‘numerosity’: a widespread distribution and use of grams across the globe,' I see as a necessary prerequisite for any successful blockchain network," she said.
  • Peirce again called for a "safe harbor" that would give certain token projects three years to experiment while regulators retooled their framework for what is and is not an investment contract.

UPDATE: 7/20/2020 20:55 UTC: An earlier version of this article misspelled the SEC Commissioner’s last name as “Pierce.”