Fairmint calls for blockchain framework for private markets in SEC proposal

The proposal outlines a seven-step framework that includes real-time regulatory oversight and updates to investor accreditation standards.

Crypto-native companies are ramping up efforts to influence regulatory guidance on digital asset transactions. On Monday, transfer agent Fairmint proposed a framework to the United States Securities and Exchange Commission’s (SEC’s) Crypto Task Force targeting what it described as outdated and fragmented back-end infrastructure in private securities administration.

Submitted to SEC Chairman Paul Atkins and Commissioner Hester Peirce, Fairmint’s seven-part proposal targets standardizing infrastructure for interoperability across transfer agents, introducing real-time regulatory observability through blockchain and enabling investor self-custody with compliance safeguards.

It also calls for a shift to knowledge-based accreditation standards, moving away from traditional income and net worth thresholds, and for a regulated decentralized finance (DeFi) sandbox.

Private equity refers to the investment in privately held companies, rather than publicly traded ones. According to financial services company S&P Global, the size of the global private equity market reached $5.3 trillion in 2023 and was expected to grow to $6 trillion by the end of 2024.

According to Fairmint, the private equity industry is heavily reliant on expensive spreadsheet software that does not have settlement capabilities, while public markets have more options available. Among the company’s clients are the wallet infrastructure provider Privy and the place-based social media platform Bloom Network.

“Private companies are managing billion-dollar cap tables in Excel while public companies have regulated infrastructure,” said Fairmint CEO Joris Delanoue. “This creates unnecessary friction, compliance gaps and limits American capital formation.”

Tokenization gains traction

The SEC Crypto Task Force has been exploring regulatory pathways at the intersection of traditional and digital assets. The agency held two key regulatory roundtables over the past few weeks, receiving industry inputs on tokenization and decentralized finance.

Financial firms are also exploring the tokenization of publicly listed companies. Retail trading platform Robinhood, for instance, is planning a blockchain network to enable trading of US-listed stocks for Europeans. Robinhood CEO Vladimir Tenev recently said that tokenization, including of private equity, would be the company’s next focus.