Esther, welcome on to the searching for show.
It's great to be with you today. I have to start by giving you my standard disclaimer, which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.
Thank you. That's the most on-entry that I've had on the show so far. Real pleasure and honor to have you on with your own views so we can really get stuck into various topics. If you could be so kind to just for anybody in the audience who wants a bit more color or doesn't know exactly who you are and what you've been doing, give us a brief intro please.
Sure. So, I'm one of typically five commissioners at the SEC. We're now at three, but typically five. I've been in this job since 2018. As commissioners, we vote on all the rules and enforcement actions. I'm not the chairman, so I don't have responsibility for the staff, budget, or agenda, but I do weigh in on those things. Before this, I was a staffer here, then went to the Hill for a bit, working on the Senate Banking Committee during the financial crisis, then at Mercatus, a think tank combining economists and lawyers. I've also spent time at a law firm. So that's my background.
Thank you so much. What a period of time to have been in that position. I've personally really enjoyed and almost always aligned with the sentiment you've been commenting around. To start off, let's think about where we are now. You are coming to the end of a tenure. At the beginning, there might not have been the regulatory support for crypto and digital assets, and now there certainly feels like there could be more, but maybe in the right way. How do you feel right now about your involvement in where America is in its legislation around crypto?
Well, it's certainly much easier to be in this position now with institutional support from the president, the chairman of the SEC, and people on both sides of the aisle and Congress wanting clarity around crypto regulatory policy. We're working closely with the CFTC. It's a moment of unity around the idea that we should have a regulatory structure that recognizes the technology's unique risks and benefits. So from that perspective, it's a very nice time to be here. Things never move as fast as you'd like, but that's part of the process, which is very important. I've been enjoying doing that for about the last year and a half.
It's the end of June 2026. The question I feel is my responsibility to ask is about the Clarity Act. There's been a lot of confidence that it will pass and predictions that it's imminent, but it hasn't yet. I'd love you to riff on where we are and your forecast for the Clarity Act.
The Senate has been working very hard on it. The House did their work, and the Senate has been working hard. I'm still optimistic that it will get done this summer. A lot of hours of work have been put in by many people in both chambers, and there's still work happening now. I expect we'll see it pass soon. Legislation is very hard, as I know from my time on the Senate Banking Committee. There are many moving pieces, and this is a big piece of legislation trying to do a lot of hard things. I think they're making good progress.
Great to hear. To dial it down for the audience, why is this important? What is it addressing? What does it allow to follow?
It's a good question. We actually have a fair amount of authority we can use now to regulate in this space, and we have been using it. The CFTC has been doing work as well. But having a statutory framework that allocates responsibility between the SEC and the CFTC and puts a formal regulatory structure for crypto spot markets in place – that doesn't exist at the federal level now – is a big development. It helps people figure out where they'll be regulated. One of the big topics in the US is the Howey test: when is a token offered and sold as part of an investment contract, and what happens to that token? The Clarity Act helps lay a clear framework for that. Also, it provides clear protection for developers, which has been of keen interest because of the fear that if you build something and someone uses it for bad, you'll be held responsible. We want to ensure that people can build things intended for good without bearing responsibility for misuse.
Absolutely. Over the last 18 months, it feels like infrastructure has been laid and we need applications to come through. There are a few remarkable generational applications in the hands of customers, but it doesn't feel like it's fully come through. That sentiment around what you're talking about is what we need for it to inflect to the next layer where there is an application universe. That all comes from the Clarity Act for the reasons you suggest.
Yeah, I think one of the issues has been that because of the regulatory approach to crypto, from a US perspective, you were actually rewarded more if you built stuff that wasn't going to be useful or last. If you built something people really wanted to use and that would be around, you faced potential enforcement actions from the SEC or even criminal actions. That's not a good environment. So we inadvertently set the industry on a pretty bad path. Part of what I'm hoping we can do now is pull it back and say if you're building something that meets a human need, we want to create an environment where it's possible to build and experiment. It takes a while to turn that ship and get people reoriented.
What personally excites you about crypto and digital assets? Why has this been important work? There was a time when it could have been questioned whether the US would allow its entrepreneurial weight to get behind this space, but you could see it was valuable. What is it that's so remarkably important about this to you?
One thing is the procedural point: we're a regulator, we're not supposed to be a merit regulator picking winners and losers. We do our job best when we have low barriers to entry so new technologies can challenge incumbents. That's how progress happens. With respect to the technology itself, it's powerful to have a technology that enables you to transfer value the same way you transfer information. The transfer of information radically improved our lives, and adding a layer where you can transfer value is powerful. Second, we've seen that intermediaries can be careless with your money, dishonest, or get hacked. Removing an intermediary can remove some of those risks, though it may introduce new ones. Another interesting piece is layering a smart contract on top of an asset, allowing automatic actions that previously required back office operations. As we think about tokenizing securities, the ability to use securities in different ways, more mobility of collateral, easier securities lending, and enabling issuers to communicate with security holders more directly, even dropping an NFT into a wallet, are all exciting possibilities.
It's so refreshing to hear you say that. I needed that refresh on the exchange of value. I'm stuck in the current thing where markets are going down because AI and quantum will take over blockchains. That's a short-term way of thinking. When you step back from back office paper ledgers to centralized databases, this inevitably leads to a more efficient economy and greater opportunity. Thank you.
Well, and I also think there's a connection with AI. I don't know where AI is going, but the idea that agents will be paying with some sort of crypto asset is my guess.
That's what Ethereum's hoping right now. It's a new use case. But fundamentally, blockchain technology surely has more opportunity because of AI interacting with each other. That's pretty much agreed on. I'd love to hear your thoughts on AI regulation. With European and American debates on managing the regs for AI, is it to be managed the same as crypto, where it was pushed back and now there's weight behind it? How would you navigate that? What advice would you give?
I'm certainly not an expert, but my approach to regulating technology is that people should be free to experiment because technology usually makes our lives better. There are always bad consequences, but we can get too focused on them. I think regulators should have an open mind and not try to centrally manage it. When we try to centrally manage it, it often doesn't work well and we miss the best parts. My general theme is to take a free market approach and regulate specific bad things as they emerge, but don't try to control it from the get-go and mold it into something a regulator thinks is good.
So what right now would you look to regulate with the model builders?
Let me bring it back to the SEC. We tried to adopt a rule several years ago around the use of AI and other technologies. It was universally panned because it looked like it would make the barrier to using new technology so high that no one would use it. Now we see the potential for AI to make financial advice more accessible and markets more efficient. I would say let's think about problems as they arise. If a firm uses AI to provide cheaper financial services, that's good, but they can't just blame the AI when something goes wrong. They need to use it with the same care as if they were using human beings. We're learning how AI works, but human beings are more complex and we've figured out how to regulate them, so we can figure out how to regulate AI when it helps provide financial services.
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Amazing. With that all said, let's change gears. You lightly danced across how you got here. I'd love to jump into your background so the audience gets context of who you are and the principles and values you picked up along the way. If you could go back as far as you care to and give us a moment in time where you first started to identify with who you would be in your career.
I think it really started when I took my first economics class. That's a bit embarrassing because my dad is an economist, but taking microeconomics made me realize how powerful economics is in understanding how things work. It shaped my thinking about regulation even then. I went on to law school and decided securities law was a nice way to mix economics and law. It made me think about the interplay between regulation and the economy.
