It was a bad year for the relationship between crypto companies, regulators and other stakeholders. Gary Gensler’s aggressive enforcement approach at the Securities and Exchange Commission included major investigations into Coinbase, Kraken and many other prominent names. This angered an industry that had complained about arbitrary rules and arbitrary justice.

Not all crypto regulators have taken a negative stance. Caroline D. Pham was one of the most notable. She was a commissioner with the Commodity Futures Trading Commission who proposed a pilot program to regulate the crypto market and tokenization. This was a much more industry-friendly proposal.

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She said that her goal was to support the creation of digital asset markets compliant, based on past experience with pilot programs. This included incorporating registration requirements, eligibility requirements and financial resources.

It was a variation on the “sandbox”, a popular regulatory approach in other parts of the world. This allows crypto startups to test their ideas in a relaxed environment, with regulators.

Pham’s proposal was a proactive move towards the digital asset industry. This is especially true given that there has not been a comprehensive regulatory structure for cryptocurrencies yet in the U.S.

The former managing director of Citigroup did not stop there. XRP Price Index and Live Chart – CoinDesk”>(XRP) court ruling in 2023, a split decision on whether the company illegally offered XRP as a security, Pham emphasized the need for a holistic approach to crypto regulation that aligns with international standards.

She referred the Financial Stability Board’s (FSB) global regulatory framework on crypto-assets as a model of harmonized regulation. This is in contrast to the view of many U.S. politicians and regulators who insist that the USA should plough its own furrow rather than imitate jurisdictions such as the European Union which passed the MiCA legislation.

The FSB framework aims at ensuring consistent and comprehensive regulation for crypto assets and stablecoins globally, in accordance with the principle “same activities, same risks, same regulations.” Pham emphasized the importance of aligning U.S. regulation with international standards in order to promote innovation and manage risks associated with digital asset.

Sandbox for regulatory purposes

Pham, a libertarian-leaning think tank, called for a U.S. regulatory “sandbox” for digital assets in a speech given at the Cato Institute on September 20, 2023. She said that this sandbox could be used to test innovative private sector projects and propositions.

Pham emphasized the need for CFTC to utilize its authority in order to provide regulatory clarity and robust guardrails for digital assets. Her proposal was to create a framework based on principles for innovation, including new technologies, products and market structures.

Caroline Pham, like Hester Peirce of the SEC, is a regulator that wants to see crypto develop and believes regulators should stay out of the way. It is questionable what influence she will have in the future (the SEC has the power to regulate and enforce crypto). It’s laudable that she is promoting a more accommodative attitude towards crypto.