The US Securities and Exchange Commission (SEC) has suffered a setback as the US District Court has denied the regulator’s motion to seal the documents related to William Hinman’s famous 2018 speech. The development was reported by James K. Filan, a member of Ripple’s legal team, who tweeted that US District Court Judge Analisa Torres ruled that the documents related to Hinman’s speech cannot be sealed as they are “relevant to the judicial process”. Judge Torres stated that the speech-related documents do not fall under the deliberative privilege process, which preserves the agency’s openness and candour, as they do not relate to agency policy, decision or position.
The SEC has been shifting its stance related to Hinman’s speech on many occasions. Initially, the regulator argued that the speech did not reflect its policy and was Hinman’s own opinion. It later changed its stance and argued that the speech falls under the deliberative privilege process. Ripple’s CEO Brad Garlinghouse regarded the development as a win for transparency as he stated that the documents would soon be made public.
However, the Court also granted Ripple’s motion to redact parts of some documents. Ripple had asked the Court to redact documents that involved contractual agreements, financial and other kinds of confidential information. In the order, the Magistrate Judge Analisa Torres approved redaction of many documents as she stated that she agrees with Ripple that some information related to the firm’s financial statement is targeted and specific.
The events surrounding Hinman’s speech began in 2018 when the former head of the SEC’s Division of Corporation Finance, spoke about whether cryptocurrency could be classified as securities. He claimed that Bitcoin and Ethereum were not subjected to SEC regulation, while other tokens could be securities. This statement created confusion and uncertainty in the industry as it was not clear which tokens could be defined as securities and what needed to be done to comply with SEC regulations.
Later, the SEC filed a lawsuit against Ripple alleging that it had raised $1.3bn through unregistered securities offerings and that XRP should be classified as a security. Ripple has denied the allegations and pushes for more transparency on the SEC’s decision-making process in this case. This is why the documents related to Hinman’s speech are crucial as they could shed some light on how the SEC classifies digital assets.
In a recent development, SEC Commissioner Hester Peirce has called for the regulator to provide more clarity on the regulatory status of digital assets. Peirce stated that the lack of regulatory clarity in the cryptocurrency industry has led to regulatory arbitrage, as businesses are relocating to jurisdictions where regulations are more favourable. She added that the SEC’s enforcement actions create confusion rather than clarity. Peirce has been vocal about her criticism of the SEC’s stance on cryptocurrencies and has even been referred to as the “Crypto Mom.”
Peirce believes that the SEC needs to provide a clear regulatory framework that will enable innovation to flourish while also protecting investors. She has even proposed a “safe harbour” for cryptocurrency startups that could provide them with a three-year cushion from some SEC regulations. The safe harbour proposal has received positive feedback from the industry and could go a long way in providing some much-needed regulatory clarity.
In conclusion, the denial of the SEC’s motion to seal the documents related to Hinman’s speech is a win for transparency in the digital asset industry. The documents could provide crucial insight into how the SEC classifies digital assets and how it makes decisions related to its enforcement actions. The recent calls for regulatory clarity by SEC Commissioner Hester Peirce show that there is a need for a coherent regulatory framework for digital assets. The proposed safe harbour for cryptocurrency startups could be a step in the right direction.
