SEC’s Hester Peirce hasn’t seen ‘no real movement’ on SEC crypto regulation since joining in 2018

If the focus of the cryptocurrency industry is still on cryptocurrency trading, it is a sign that the industry has not lived up to its potential, according to

Securities and Exchange Commissioner Hester Peirce often feels like she is “on an island by herself” within the SEC. “I see these things differently than some of my colleagues did.”

That’s an understatement. While SEC Chairman Gary Gensler clarified that he regards most crypto assets as securities needing SEC registration and portrayed the industry as a Wild West, Peirce, one of five commissioners at the US banking regulator, has long been vocally pro-crypto, although in her definition, “I’m more in favor of people’s ability to try things and experiment with things, and I think that there has been a lot of interesting experimentation in the cryptocurrency space, and I expect there will be many more in the coming years.”

Peirce has spoken Decipher last week for the latest episode of the gm podcast. He prefaced his comments, as he always does, by saying they are his own and do not represent the views of the SEC. Peirce was initially nominated to serve as SEC commissioner by President Barack Obama in 2016, but the Senate didn’t act on her appointment until 2017. She is currently serving a 5-year term, which expires in 2025. “Because I’m at the SEC since 2018, not seeing any real movement, positive movement, over that period, is frustrating.”

He said he first heard of Bitcoin around 2012 and has since learned about the broader cryptocurrency ecosystem. But his interests are broader, he said, adding that his optimism about the industry has more to do with his desire to change the SEC’s approach to innovative new financial products, cryptocurrencies and otherwise.

“He wants to keep the doors open to innovation, he wants to make sure the financial sector isn’t dominated by a few big companies to the exclusion of everyone else. Because there are a lot of people with big ideas and I think it’s great that people are challenging the way we’ve done things,” she said.

The FX effect

At the time of Peirce’s interview last week, former FTX CEO Sam Bankman-Fried had not yet been arrested in the Bahamas and the SEC hadn’t done it yet accused him of allegedly defrauding stock investors in the company. Since Monday evening, the Justice Department has also filed charges, alleging he committed conspiracy, wire fraud and money launderingand the CFTC plans a commodities law violation lawsuit.

The cracks in FTX’s foundation began to show in early November, when a report revealed that the cryptocurrency exchange’s sister company, Alameda Research, held billions in illiquid FTT (FTX’s trading token) on its balance sheet. . A subsequent tweet from Binance CEO Changpeng Zhao referencing those “revelations” triggered massive withdrawals from FTX. After a few days, FTX had to freeze the funds. The company first sought a buyout from Binance but ultimately filed for bankruptcy on Nov. 11.

Last week, Peirce said he told people that all that Bankman-Fried has come to represent is, in his view, not the magnitude of the cryptocurrency industry’s potential.

“When I talk to people, I remind people, one: that cryptography is not about centralized entities; two: that cryptocurrency isn’t even about trading,” Peirce said. “Although there has been a lot of emphasis on trading in recent years, that’s not the core of what cryptocurrency is all about. And if it’s the core, it probably isn’t living up to its potential. And three: it’s still early days, so we have more to see.

Now that Bankman-Fried has been arrested and charged by multiple entities, Peirce’s warning about regulatory frameworks born out of reactions to the FTX explosion is especially prescient. What he hopes he doesn’t see, he said, is another major legislative push that happens before a thorough analysis has been done, such as after the 2008 global financial crisis.

“I think we should all be looking for regulatory frameworks that are developed in the context of enforcement action, because it’s a very attractive thing for regulators to do that,” he said. “And excludes everyone else from the process.”

He recalled that the 2008 recession was the catalyst for many new regulations. The largest and most sweeping measure was the Dodd-Frank Wall Street Reform and Consumer Protection Act, which in turn paved the way for the Consumer Financial Protection Bureau, the Financial Stability Oversight Council, and the Volcker Rule to curb speculative investing.

He’s saying that the DOJ itself has compared the collapse of FTX to Lehman Brothers. While Peirce said he doesn’t want to see a big wave of reactionary regulation, he advises cryptocurrency firms to proceed with caution.

“I urge people: The scope of securities laws is very broad,” he said. “If you have any doubts, even if you don’t have any doubts, consider calling a lawyer.”

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