SEC Commissioner Hester Peirce, aka Crypto Mom, has once again defended the crypto space by calling out the SEC for “stifling” the industries growth.
In a speech at the Securities Enforcement Forum in California on May 9th, SEC Commissioner Hester Peirce calls out the SEC for “stifling” the growth of this space. While she is happy with the lack of over enforcement, there isn’t enough regulation clarity for her.
A year ago she gave a similar speech expressing her opinion that the SEC shouldn’t try and over regulate and over-enforce the space because that would stifle development. By doing nothing, in her opinion, the SEC has, in fact, been stifling the development of the industry.
“I also expressed my concern that the SEC would lead with its enforcement powers, thus allowing anxiety about the risks of new technology to overshadow the opportunities it presents. I worried that hasty regulation would smother the industry in its infancy. My concerns did not become reality. The enforcement actions we have taken to date in the crypto space have—for the most part—exhibited appropriate restraint. On the regulatory side, hasty is not the word I would use to describe the SEC’s pace. It is not the SEC’s overzealous action that has stifled the crypto industry, but its unwillingness to take meaningful action at all.” -Hester Peirce
She points out that it isn’t the SEC’s place to get involved in the “creative process” but it is up to them to help clarify regulations so that the public can comply with their laws and regulations and she feels that the SEC “hasn’t fulfilled this duty.”
“The problem is that the securities laws do not cease to operate as a new industry develops. Consequently, individuals and companies in the industry must comply with our securities laws or risk becoming the subject of an enforcement action. It is, therefore, our duty as a regulator to provide the public with clear guidance as to how people can comply with our law. We have not yet fulfilled this duty.” -Hester Peirce
She did go on to say that she is happy with some of the enforcement over the past year and stepping in on situations where it was clear that tokens were sold as unregistered securities. She also commended and approved the use of no-action letters in specific situations.
The main issues for her are what projects are securities so that venues, investors, and the funds that hold those assets are able to understand which projects are and aren’t securities. She feels that the SEC has been almost entirely silent.
“Investors typically use brokers to buy and sell their securities. Brokers and investment advisers who hold client assets are subject to regulations regarding the custody of those assets. How can they satisfy the custody rules if the thing being custodied is a digital security? How can auditors fulfill their obligations in connection with digital securities? If a broker is selling a digital security, how can the broker prove that it has control over the security such that no one else can sell the same asset? May a broker-dealer’s business include a mix of digital assets, only some of which are securities? If a platform wants to allow trading in digital assets, what are its obligations? Is it permitted to trade both securities and non-securities?” -Hester Peirce
Her final point was that the SEC shouldn’t try to guide innovation but should look for the positives that it brings. If the U.S. remains silent on regulations then the crypto space will likely go elsewhere with their innovation.
“It is time for us to tackle the remaining legitimate legal questions in a way that does not throw merit-based obstacles in the way of socially beneficial innovation. As I said last year, regulators are not in charge of the creative process. We should not be trying to guide innovation, but we also should recognize that we cannot stop it and embrace the potential for positive change that innovation offers. Our silence is likely to simply push this innovation and any attendant economic growth into other jurisdictions that have done their work and provided clear guidelines for the market participants to follow. The U.S. securities markets have historically been the envy of the world; I do not want heel-dragging by the SEC in crypto to mar that well-deserved reputation.” -Hester Peirce