SEC Commissioner Hester Peirce said that both investors and the SEC are interested in taking a more productive approach to crypto regulation.
In her remarks at the “Regulatory Transparency Project Conference on Regulating the New Crypto Ecosystem: Necessary Regulation or Halting Future Innovation,” she was quite critical of the SEC’s approach, but remained optimistic that the SEC can change. heading.
“Watching the SEC refuse for the past four years to productively engage with crypto users and developers has sparked feelings of disbelief at the SEC’s baffling and misplaced approach to regulation,” he said.
“Using the tools Congress has provided us and leveraging input from the public, we can provide regulatory clarity, facilitate iterative experimentation, and go after bad actors in the crypto space,” he added.
According to Peirce, it is time for the Commission to stop categorically denying exchange-traded crypto products.
Until this year, he said, all futures-based exchange-traded products that were approved were subject to the 1940 Act. However, in April this year, the Commission approved the first non-Futures Act ETP. 1940 holding bitcoin futures for listing and trading on an exchange.
The Commission has not yet approved any ETP based on the bitcoin spot market.
He added that despite the success of applicants for futures-based ETPs over the last eight months, the Commission continues to deny spot bitcoin ETPs.
Peirce said that the Commission has tried to cobble together a regulatory framework through enforcement actions, adding that enforcement is the right tool to tackle rampant fraud in the crypto space.
However, according to the Commissioner, one-off enforcement actions that represent the first time the Commission has publicly addressed a particular problem are not the right way to build a regulatory framework.
“To do that, Congress gave us other tools, including the authority to craft custom exemptions and craft rulemaking with notices and commentary,” he said.
He added that enforcement actions shorten the regulatory process, citing BlockFi’s recent $100 million settlement with the SEC and 32 states.
She said that BlockFi is one of several companies offering crypto lending products, which were determined to be securities products. The Commission, in its agreement, established a path under which BlockFi could register under the Securities Act and register or take steps to qualify under an exemption from registration of the Investment Company Act, she explained.
“The specific path laid out in the settlement agreement drawn up between BlockFi and the SEC, if successful, will likely become the standard for crypto lending regulation,” he said.
“Similarly, we could consider, instead of a reactive enforcement approach, a proactive regulatory approach regarding non-fungible tokens, stablecoins, decentralized exchanges, decentralized autonomous organizations, and other crypto innovations,” he said.
Peirce further added that “people who do things in crypto need to consider whether laws, including securities laws, govern their behavior.”
For this to happen in a more efficient and comprehensive manner, the Commission must provide a level of clarity that has so far been lacking, he said.
“The SEC could think about the issues with people in the crypto community with a view to pragmatically achieving our regulatory goals,” he said.
“By doing so, we could facilitate compliance by good actors and inhibit bad actors much more effectively than we do through time-consuming and resource-intensive enforcement actions,” he added.
Peirce mentioned that the CFTC and the SEC have worked effectively in the past in areas where their jurisdictions are closely linked.
He added that a recent rule proposal that appears to implicate crypto platforms generated a number of comments from individuals and organizations willing to work with the SEC in crafting an appropriate regulatory approach.
“People are ready to work with the myriad questions and regulatory concerns surrounding cryptocurrencies. Now all we have to do is extend a hand to them,” he said.