SEC’s Peirce Pushes for Crypto Sandbox—Wormhole’s Legal Team Pushes Back

SEC Commissioner Hester Peirce doubles down on her call for a regulatory sandbox—because nothing says ’innovation’ like asking permission first. Meanwhile, Wormhole’s legal chief fires warning shots about unintended consequences. Guess someone’s worried about losing their compliance racket.

Sandbox advocates argue it’ll foster blockchain breakthroughs. Critics see another loophole for VCs to exploit—because if there’s one thing crypto needs, it’s more ways to dodge accountability while chasing the next pump-and-dump.

Sandboxes are great in theory, but there are risks: Yoon

Peirce points to ongoing technical issues as a key obstacle. In particular, the technical infrastructure remains underdeveloped. Yoon acknowledged this as a compelling argument in favor of regulatory exemptions for tokenized securities projects.

“The infrastructure needed to support tokenized securities is still rather undeveloped and expensive to implement,” Yoon, Wormhole.

Still, Yoon noted that she disagrees with Peirce’s concept of a regulatory sandbox. The concept, which Peirce has long advocated, refers to allowing startups to test certain products that exist in a regulatory gray area.

These firms are closely monitored by regulators but face fewer penalties and a reduced compliance burden. Yoon argues that sandboxes sound promising in theory but introduce risks such as arbitrary enforcement and favoritism.

“A sandbox is only as good as the leeway and support a regulator offers to The Sandbox participants. There is also a concern that regulators may favor sandbox participants, leading to biased oversight or even weakened enforcement in the long term,” Yoon, Wormhole.

Instead of a regulatory sandbox, Yoon proposed a limited-duration regulatory exemption. This WOULD allow companies to test their products in a real environment, helping them adapt to actual conditions and scale more effectively.