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Hester Peirce: SEC Commissioner Says Regulator Now “Enforcement-Only”

Published March 1, 2024 1:11 PM
Eddie Mitchell
Published March 1, 2024 1:11 PM
Key Takeaways
  • SEC Commissioner Peirce is skeptical of the securities watchdog’s overbearing approach to regulation.
  • She hopes that clearer rules can be established in the U.S. so that developers can remain innovative and competitive.
  • Peirce thinks decentralization has a lot of benefits to offer the U.S. financial system.

Speaking at ETHDenver on Thursday, February 29 , Hester Peirce, Commissioner of the U.S. Securities and Exchange Commission (SEC), expressed concern over the regulatory hurdles imposed on crypto developers and projects by legislators and calls for greater decentralization in the U.S. financial system.

Affectionately called “Crypto Mom” by the Internet for her advocacy of the crypto industry since joining the SEC in 2018, Peirce humorously lamented her presence as a regulator at the annual crypto event, highlighting how her presence reflected the wasted brainpower crypto developers need to use to avoid “areas of regulatory ambiguity.”

SEC Enforcing Crypto

Of the five SEC Chairman, Peirce is undoubtedly the most crypto-friendly, and she has remained outspoken despite SEC Chair, Gary Gensler, and other colleagues taking a considerably more skeptical approach to regulating the space. As she puts it, the SEC is in an “enforcement-only mode”.

She is critical of the SEC’s handling of the crypto industry, describing the enforcement approach to regulating as “strange”. As she sees it, if regulators and lawmakers want to sort the good from the bad, then you need clear rules that people can follow.

Furthermore, if people are unsure as to how they establish a crypto product in the states, then U.S. innovation and competitiveness will take a hit. “If we all want to bubble wrap ourselves it would be a much less interesting country,” she says.

This is no secret given the SEC’s many lawsuits and legal battles against many major crypto players such as Ripple (XRP), Binance, Gemini, and others, and this is likely to trickle down to smaller developers and projects and limit their scope of ambition. “If we had clearer rules, you could focus on building,” Peirce said .

When noting the numerous courtroom battles that the SEC has lost, Peirce remarks on the irony of the Grayscale GBTC case. After the SEC had gone after Grayscale for attempting to convert the Bitcoin trust into an exchange-traded fund (ETF). The subsequent loss ultimately opened the door for the approval of several spot BTC ETFs in January 2024. “It’s remarkable to me that it took a court to do that,” she adds.

Regulating Decentralization

Interestingly, Crypto Mom had some interesting takes on decentralization. According to Perice, the U.S. financial system could benefit from decentralization, noting that it could strengthen and reinforce the financial system, “[…] points of centralization always keep me up at night,” said Perice.

The trouble with decentralized technologies, especially in the realms of decentralized finance (DeFi) and other crypto-financial products on the market, is that there needs to be some level of enforcement.

According to Peirce, the SEC is still trying to figure out how to navigate crypto as now it’s a matter of “[…] people working together and someone interacting with code” as opposed to an entity or individual.

It’s a catch-22 of walking the line between centralization and decentralization, But she keeps an open mind, noting : “The whole concept of decentralization stands very much in contrast to what we’re used to at the SEC.”

The freedoms offered by DeFi and others do come with significant risk, and whilst people can wish for greater decentralization across the financial landscape with less government oversight, it is the government that people first turn to when they lose their money and assets.

Peirce is Optimistic

The SEC Commissioner highlights that it’s not the role of the SEC to “get comfortable with crypto” or legislate “crypto good, crypto bad”, but instead work out where “securities laws are implicated”, guide consumers, and let them and the markets make their own decisions.

She comments on the optimism and excitement amongst ETHDenver and broader crypto industry participants and asks for feedback to help her conceptualize a better regulatory framework.

“I really think that we can get to a better place in the United States, it’s taken a lot longer than I or probably you all want, but I do think we can get there if we work together and think about what would make sense.”

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