SEC Regional Director Erin Schneider talks SPACs, Coinbase and what startups could do better

If startups were looking for more specifics about crypto lending, new rules by which blank-check companies might have to abide, or whether the SEC views NFTs (non-fungible tokens) as securities, they didn’t get any this week from Erin Schneider, the regional director of the SEC’s powerful San Francisco office.

While speaking at TechCrunch Disrupt 2021, Schneider — whose team has helped wring settlements out of Theranos, Elon Musk and, more recently, the app analytics company App Annie — was clear from the outset that she was limited in what she could say.

She did, however, share insight into her personal thinking about a range of these issues, which, given her position, seems very much worth knowing (watch the full interview with Schneider below).

For starters, we asked Schneider about Coinbase’s now-shelved crypto lending product, and why BlockFi, a crypto lending company, has been grappling with state regulators that want it to stop offering its own interest-bearing products. (The SEC — a federal agency — put the kibosh on Coinbase’s plans.)

Schneider said startups should expect to abide by both federal regulations and state regulations, which can differ widely depending on the state. But she also used the question to answer something she wasn’t asked: Can financial products like Coinbase’s proposed offering confuse consumers? Her answer to this was, no surprise, resoundingly affirmative.

I do think over the last couple years, we’ve seen companies that started out calling [themselves] very disruptive, but they’re starting to add on features that look very similar to traditional financial structures, and especially in that sort of situation, the risk for investor confusion is high. [So] any regime, be it a state or a federal regime, is going to look very closely at how these companies are advertising their products and what regimes they are subject to, because I do think there’s potential for investor risks and investor confusion.