Securities Regulation Daily Wrap Up, BLOCKCHAIN—Peirce envisions joint U.S./U.K. crypto sandbox, (Jul 18, 2025)
The SEC Commissioner believes that blockchain technology is ripe for experimentation and has the potential to transform the way the financial system works.
SEC Commissioner Hester Peirce continues to push for a cross-border version of a regulatory sandbox serving both the U.S. and U.K. markets and believes that the borderless nature of blockchain technology and crypto assets makes them good candidates for sandbox experimentation. In remarks to the City of London Corporation, she noted that market participants are exploring many different blockchain business models, so a sandbox for tokenizing securities might make sense, adding that building in cross-border interoperability will be easier now than when business models have matured.
Peirce cautioned, however, that fundamental differences in approaches to and objectives of financial regulation between the U.S. and the U.K. could hamper those efforts. “As Europe’s embrace of double materiality in corporate reporting and export of its sustainability disclosure requirements have laid bare, market integration suffers when two jurisdictions diverge on core matters such as the purpose of financial statements and other securities disclosures.”
She is hopeful that the U.S. and U.K. partnership can serve as an example of how nations can align interests in pursuit of better markets. In her view, the right course is to allow market participants to be free to respond to market incentives rather than serving as “robotic mercenaries in a government-orchestrated initiative to achieve objectives unrelated to investor protection, efficiency, competition and capital formation.”
Cross-border sandbox idea. Peirce first floated the idea of a cross-border sandbox in a 2024 comment letter to the Bank of England and the Financial Conduct Authority on their consultation on a digital securities sandbox. The U.K. proposal was limited to U.K. firms, but she argued that a cross-border version of the sandbox could be even more effective.
Innovators could benefit from simultaneously serving two markets, she said, and regulators would be able to see more data on how complex emerging technologies operate in different contexts. Participants could adhere to a single set of conditions in both jurisdictions, she added, and be served by a greater pool of product and service providers.
Peirce said that in discussing her idea over the past year, several themes have emerged. Among them is that a sandbox has limited usefulness unless it comes with a smooth exit ramp that takes the participant into a workable permanent regulatory environment. Also, a sandbox with time, customer, or activity limits, without a mechanism to extend the timeline or raise the limits, could hinder a growing company. On this point, she said that regulators must be ready to work with participants to change conditions as needed.
Allow existing firms into sandbox. She has also come to believe that incumbent firms and new entrants should have equal access to the sandbox. In her view, this could help combat the notion that the sandbox could become a mechanism for regulators to pick winners. A proactive invitation to all firms to consider whether the sandbox is right for them can help fight claims of favoritism and build trust among sandbox users and market participants, she said.
Another emerging theme is that regulators cannot force participants into a sandbox, Peirce stated. The operation of a cross-border sandbox may have to wait until a company with a concrete idea for cross-border activity approaches both regulators.
DEI warning. Finally, she warned that the conditions imposed by a cross-border sandbox would need to be workable for both jurisdictions. She said that she would not support conditioning a sandbox on sustainability or diversity objectives. “Extracting conditions unrelated to—and potentially distracting from—the safe and effective functioning of the project would be an improper use of financial regulation to achieve political outcomes,” she stated.
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