Former SEC Chairman Jay Clayton Joins $2 Billion Bitcoin And Crypto Custodian

Former SEC Chairman Jay Clayton Joins $2 Billion Bitcoin And Crypto Custodian

Former Securities and Exchange Commission Chairman Jay Clayton is joining Fireblocks, a $2 billion Israeli-based crypto custodian focused on institutions as an advisor.

This appointment represents the second crypto-focused engagement for the former regulator, following his March 2021 appointment to the Board of Directors at One River Asset Management, which recently filed a carbon-neutral Bitcoin ETF application with the SEC.

At Fireblocks, which will be the first pure-crypto institution on his resume, Clayton will help guide the firm through the evolving legislative landscape in the U.S. and abroad, and help develop the overall security posture for the fast growing firm.

The company went from 100 clients to 500 in the span of a few months in sectors such as crypto trading, crypto retail and traditional financial institutions. Since its inception in 2019 Fireblocks has acted as custodian for over $1 trillion in digital assets. Additionally, with its focus on large institutions, Fireblocks is the type of firm one might expect Clayton to join after his tenure at the SEC, which took a conservative and risk-adverse position towards the growing crypto industry yet was open to the potential of blockchain technology to add transparency and efficiency to the financial system.

“I'm very bullish on the ability of blockchain and other technologies to eliminate frictions in the system,” says Clayton. “You will end up with better and more secure transfer and custody as we integrate blockchain technology into our financial ecosystem.”

Fireblocks’ growth has dovetailed with an overall maturation of the industry and surge in valuations that saw the price of bitcoin reach an all-time high above $64,000 and the total market capitalization of all crypto assets go over $2 trillion. However, it faces many roadblocks ahead.

Aside from bitcoin and ether, the SEC is yet to make definitive determinations regarding whether other native digital assets such as NFTs and DeFi tokens are in-fact securities.

With continuing uncertainty surrounding classification of many digital assets, Clayton says that Fireblocks is prepared to respond to any impacts on the platform's 700 supported assets.

“I know that [Fireblocks CEO Michael Shaulov] and his colleagues are committed to regulatory compliance,” he says. “So to the extent that the SEC determines that certain digital assets that are trading on platforms are in fact securities and should be regulated accordingly, I certainly understand that.”

Still, some industry insiders and outside observers may find Clayton getting involved in another crypto endeavor surprising given the cautious approach taken by the SEC towards the burgeoning industry under his tenure. In fact, many watchers and crypto advocates were encouraged when President Biden appointed former CFTC Chairman Gary Gensler to be Clayton’s successor, because he had testified positively about blockchain in front of Congress and even taught courses on the subject at the Massachusetts Institute of Technology. However, Clayton is pleased with how the SEC handled crypto during his chairmanship.

“What people have to understand is that the Commission's authority is defined by statute and promulgated regulations,” Clayton adds. “The women and men of the Commission do an extremely good job in mapping those obligations to the advent of digital securities offerings and letting people know that digital securities offerings and trading has to comply with the same rules as traditional paper based securities trading, which by the way, has in many functions become largely digital in and of itself.”

He also pointed out ways that the regulator sought to drive the industry forward.

One of the last things the President’s Working Group did while I was at the SEC was a report on stablecoins, the considerations for stablecoins, including such as when stablecoins would not be securities, and and continuing that type of interagency work would be something useful to our overall financial ecosystem,” he says. “I hope that progress continues.”

Finally, in signing up for his second crypto-related endeavor Clayton is furthering a trend of former officials and regulators that engaged with the industry after moving into the private sector. Recent former regulators that joined the growing sector include Ben Lawsky, who went from New York State's first Superintendent of Financial Services, making rules around crypto licensing, to advising Bitcoin funds.

Clayton was also preceded by former Commodity Futures Trading Commission Chair J. Christopher Giancarlo who went from making regulations around the classification of digital assets to writing a brief on behalf of Ripple, the largest holder of XRP, which is currently being sued by the SEC in December 2020 for an alleged $1.3 billion unregistered securities sale. He is also a co-founder of the Digital Dollar Project, an initiative that seeks to promote research into the creation of a sovereign digital currency in the U.S.

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