SEC Commissioner Speaks Boldy on Cryptocurrency Regulation
10.18.2024
Securities and Exchange Commissioner Hester Peirce spoke forcefully in support of common-sense regulation and an improved registration process for cryptocurrency at the New York State Bar Association’s Global Conference in Seoul, South Korea.
Appearing by video conference, Peirce outlined the flaws in the current regulatory regime, calling it too focused on enforcement without support for innovation. Peirce advocates for a collaborative approach to regulation, working to solve unique problems with digital currency and provide a better pathway for regulation.
The commissioner reminded attendees that she was speaking for herself and not on behalf of the SEC.
Regulation and Enforcement
Peirce said that many companies are trying to register their cryptocurrency with the SEC and cannot navigate the system. Many attending the Global Conference agreed, sharing their frustration at being unable to advise clients about cryptocurrencies because of such unclear regulations.
“It is wrong when people are trying to figure out how to apply [to the SEC] and need help, then we come in on the enforcement end. We can design a better regulatory framework than having enforcement show up at your door,” Peirce said. “As I learned more about crypto, I understood it was really different. I believe we need to use the regulatory side of the house to make this doable. So few companies have come in and tried to register. It’s too expensive and it’s like we are trying to jam a round peg into a square hole.”
Peirce made news in April 2023 when she released a public statement critical of her agency’s decision on regulation of digital currency.
“Rather than embracing the promise of new technology as we have done in the past, here we propose to embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology. Accordingly, I dissent,” she wrote.
Her ardent support of digital currency earned her the nickname “Crypto Mom.” She told a Forbes reporter following the statement that she is not a fan of the title and stressed that government is not your mother.
Investor Responsibility and Financial Literacy
Howard Fischer, the moderator of the session at the Global Conference, asked Peirce how to find a balance between consumer protection and the personal responsibility of the investor. She reminded the attendees that it is not the SEC’s role to determine winners and losers in the marketplace and that every investment decision comes with risk and personal responsibility.
“If someone is an adult, far be it from me to stand in the way. It’s not our role to tell people what to put in their portfolio,” she said.
Peirce did express concern over investors’ lack of financial literacy, which makes them susceptible to scams.
“Financial education is so important. We need to have these basic lessons, so if someone promises a great rate of a return – you can approach that with a lot of skepticism,” she said. “We need to do a better job telling everyday people to be skeptical whether you are buying crypto or something else.”
Congressional Framework
The 45-minute panel ended with a look ahead to the next Congress, which may take up proposed regulation called FIT 21. While Peirce could not comment on pending legislation, she told the conference that lawmakers are taking a holistic approach to regulating digital currency. The plan, which was only brought up in the House, sets up a framework where some securities are regulated by the Securities and Exchange Commission and others are regulated by the Commodity Futures Trading Commission.
When asked about her thoughts on sharing regulatory authority with two agencies, Peirce responded, “It’s not surprising, we don’t know what crypto will become.”
