Wormhole Attorney General has concerns

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Cathy Yoon praised Commissioner Peirce’s remarks on Crypto’s regulations, but expressed concern about the idea of a regulatory sandbox.

The Securities and Exchange Commission has fundamentally shifted its crypto policy, bringing a voice like Commissioner Hester M. Perth to the forefront. However, some still believe that her procryptic approach has important limitations.

Cathy Yoon, legal counsel for the Wormhole Foundation, recently commented on Commissioner Peirce’s remarks. To some extent she agreed that a regulatory exemption for cryptography is necessary, but she criticized Perth’s idea of a regulatory sandbox.

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In particular, the discussion focuses on tokenized securities that fall under the jurisdiction of the SEC. Before the SEC considers it to be compliant, all types of security must meet strict regulatory requirements. However, there are important issues to come.

The sandbox is great in theory, but there is a risk: Yun

Perth points to ongoing technical issues as a significant obstacle. In particular, the technology infrastructure remains undeveloped. Yoon has conceived this as a compelling argument in favour of regulatory exemptions for tokenized securities projects.

“The infrastructure required to support tokenized securities remains undeveloped and expensive to implement,” says Yoon, Wormhole.

Still, Yoon pointed out that she disagrees with Perth’s concept of a regulatory sandbox. A concept that Peirce has long advocated refers to allowing startups to test specific products that exist in the regulatory grey area.

These companies are closely monitored by regulators, but have fewer penalties and reduced compliance burdens. Yoon argues that sandboxes sound promising in theory, but introduce risks such as arbitrary enforcement and favoritism.

“The sandbox is only as good as regulators can afford to sandbox participants, and it supports sandbox participants. There are also concerns that regulators may support sandbox participants, which could even lead to bias and weakening of enforcement in the long term,” says Yoon, Wormhole.

Yoon proposed a limited-time regulatory exemption in place of the regulatory sandbox. This allows businesses to test their products in real-world environments, helping them to adapt to real-world conditions and expand more effectively.