Hello everyone, welcome back. We are very delighted to have Commissioner Peirce, Hester Peirce from the US Securities and Exchange Commission to give us closing remarks at today's summit. We had excellent presentations. We started very early in the morning UK time. We heard from Australia, China, India, Europe, Africa on a range of topics including practical applications of blockchain technologies, digital assets, etc. And Commissioner Peirce has spoken at our conferences before. You may remember her excellent keynote which is still available in the public domain, 'Paper, Plastic, Peer-to-Peer.' I remember I think it was in 2021 or 2022. So we are very grateful and honored to have her at today's forum. Commissioner Peirce, very warm welcome to you and we have asked her to say a few words really about what's happening in the US with regards to digital assets, the road ahead, and what are her thoughts on the future of digital assets in the US and beyond. Thank you very much.
Well thank you. It's a delight to be part of the summit today and I appreciate you letting me join you virtually as I did in 2021 when I gave that 'Paper, Plastic, Peer-to-Peer' speech. So I should start with my disclaimer, which is that my views are my own views as a commissioner at the SEC, not necessarily those of the SEC or my fellow commissioners. It is interesting. I did go back and look back at that 2021 speech and so many of the issues that we were dealing with at the time are still alive now. And if you had told me that at the time that we wouldn't have solved many of these things, it would have been a little bit disheartening to me candidly that it had taken so long. But here we are today in 2026 and we are at least in I think in the United States in a better place than we were a couple years ago. Under the leadership first of acting Chairman Uyeda and then Chairman, current Chairman Paul Atkins, we've really taken the task of writing a regulatory framework for crypto to heart and we've been working quite hard on that. So we started out by doing something that I think we should have been doing many years before, which is actually listening to people. Listening to people who are trying to build in this area, trying to understand what excites them, what challenges they're facing with the current regulatory regime and where they think the industry is going and therefore where we should be spending our time. And so that listening tour happened both through roundtables and then we also have a very active written comment file which is available to anyone to see and I do commend you. There's a lot of really good stuff in that file.
So then we started as soon as we could addressing questions that we knew people had through guidance documents. A lot of those documents just addressed issues like everything from memecoins to stablecoins to staking and mining and the treatment that those things would have and whether and how those things implicated the securities laws. Then we did come out with a commission level interpretation to answer this question of when is something a security. So it's sort of a taxonomy of digital assets and putting things in different buckets to understand when they're actually securities. That was a joint interpretation with the CFTC, the Commodity Futures Trading Commission. And then more recently we released a regulation crypto assets which is an attempt to tell people how we're thinking about doing fundraising using tokens. So this is something that had clearly been on people's minds many years ago. But we are finally coming out with a framework and that framework pairs disclosure requirements with the ability to raise funds. So you can raise, this is still a proposal, we're collecting comments now, you can raise $5 million in sort of a, it's called the startup exemption. It's a very streamlined exemption. You can raise up to $75 million in something we call the fundraising exemption. There are a lot more requirements there. $75 million is a lot of money and so if you're going to use that exemption, there are more requirements.
And then there also is a safe harbor. So the idea is that people at some point will want to exit the securities regime. This is something I've been talking about, in fact, was talking about back then in that speech in 2021. So giving people a way out to get a clear signal that they're no longer covered by the securities laws when we're thinking. So this question of if you sell a crypto asset that is part of an investment contract. So a lot of people have heard of the Howey test. And one of the things that had happened in the analysis of the sale of crypto assets is that you're not only selling the crypto asset, but you're making promises with it to build out a network. And so what can we do to provide a framework around that? And so what we said I think is this is in the interpretation and then it flows through into Reg Crypto Assets is tell people what you're promising to do. Be clear about those promises. Lay them out at the beginning and then tick through them. Fulfill those promises and then you can move on. So that's really what we're thinking of with Reg Crypto Assets. There's a lot more work to be done. We have work obviously on custody issues, which again those issues were something that I discussed in that 2021 speech. So we're working on a rulemaking custody for investment advisors that want to hold crypto assets. And then we're also working on the broker-dealer side, which again, that speech was interesting because at the time we had just issued the special purpose broker-dealer exemption, which ended up proving, and I noted in that speech some of the limitations around that exemption. And sure enough, it turned out that because it was so limited, it was not useful. And so I think that's a cautionary tale for us.
Another area that we're thinking a lot about is tokenized securities. And one of the big questions around tokenized securities is how can those tokenized securities trade? And so we're working on, we've been talking about this for some time, an innovation exemption to allow for on-chain trading of tokenized securities. But I think that as we look at what makes a good experiment, a good regime within which experiments can take place, it's not our job as regulator to run the experiment, but it is our job to set up a regime within which those experiments can run. And it really is being practical. We need to make sure that our investor protection, market stability goals, objectives are met, but within that we need to give people reasonable room to experiment. And so we're urging people to keep talking to us about what they need as they're thinking about what they'd like to try. And we're happy to work with people. I do think that while most tokens now are not securities, as we see the shift to real world assets on chain, we're going to see a lot of tokenization of securities and that does raise a whole set of very interesting issues. And that's been where a lot of our time has been spent.
Additionally, we're thinking about issues like vaults, which I put out a statement recently on vaults. And I think the point of that statement as well as an earlier statement about tokenization is you can't assume that the rules don't apply simply because you move something on chain. So vaults have great promise as a way of managing assets through a smart contract. And I'm very encouraged about that. But I do think that there's some potential regulatory issues that people need to think about, not only under the Howey test, under something we call the Reeves test under investment company act law. And so there are a lot of different pieces there that we're thinking about. I'll just close and then I'm happy to take some questions if folks want that. But I'll just close with a few principles. I'm on my way out. So I'm not going to be at the SEC beyond the end of this year. And I would have loved to see all of this settled and finished and done, but we're not done. And we have a lot of work to do on the regulatory framework. Because I've been at the SEC so long and I've been thinking about these crypto issues for so long, I think there's some important principles.
First, we can see and we did see sadly what happens when you have regulatory ambiguity and you have regulators who are unwilling to work with people who are developing technologies and different approaches to try to develop an appropriate framework. So regulatory ambiguity breeds bad things. It's a great place for bad actors to be. It's a terrible place for good actors to be. And so now that we have an environment in which regulators are willing to work with folks, it's very important that people try to build things that are useful that meet societal needs and that will help to make sure that any reforms that we make are long-lasting. Second I would say is there are key protections that we have to build into place. Developer protection is important. Software developers should feel comfortable developing tools. They should not be held responsible for everything that everyone does with those tools. Obviously if they're working with bad actors to use those tools for bad purposes that's one thing but software development protection is really fundamental.
Another thing that I think is fundamental is that we want to preserve people's freedom to transact and I think sometimes, and that's an area where digital assets I think have been really revolutionary. The ability to transfer value the same way that we were able to transfer data, you know, all across the world, that's a very powerful technology and we should celebrate that and I think sometimes we tend to see our regulatory framework that we have and we want to make sure that everything conforms to that regulatory framework without really asking the question at what price. Now obviously the regulations serve an important purpose. We want to protect our citizens. We want to protect our nations. We need to have protections in place to allow that. But we should not forget that we're trying to build societies in which people can build products and services that serve their neighbors. And so sometimes that's going to require us to ask the question of whether our existing regulatory system needs to change in any way. And so I really encourage people to think about that. And then finally I would say privacy is really important. One of the amazing things about this technology is that everything's on chain and you can see what's happening. Well, that's great and there are very positive aspects of that, but at the same time, nobody wants her entire financial life to be out there on chain for everyone to see. And so privacy protection will be something that is important in the future if life is going to move on chain or a big chunk of our lives is going to move on chain. And so how can we think about protecting privacy in ways that really recognizes the fundamental human importance of being able to keep your information private unless you choose to reveal it to other people. And obviously we have to think about routes so that law enforcement can get the information they need but privacy should be an assumed requirement of this technology.
I did not mention and I want to just briefly before I close. I knew I said I was going to end here, but I do want to say that there's still work going on in the United States on the Clarity Act, which is the market structure framework for crypto. Next week there's going to be some work done in the Senate on that. And I'm very encouraged that that's still moving forward. There's a lot that we and the CFTC can do without a legislative framework in place, but I think everyone recognizes the value of a legislative framework in providing the basis upon which the regulators can really tackle all of the issues necessary in the market structure realm. So we're looking forward to that legislation getting passed and we will be very busy. Well, I shouldn't say we because I won't be at the SEC then, but the SEC will be very busy implementing the rules once that legislation passes. So again, happy to answer any questions. I know that was a bit all over the place, so if there's anything anyone wants to drill down on, please don't hesitate to ask.
Yeah, thanks for that question because I really do think it draws on the experience that I've had which really has taught me an important lesson about regulatory ambiguity. Sometimes as regulators we think, oh well if we have ambiguous rules then it means we have more control over what's going on. But that's actually not the case. Ambiguous rules drive good actors away. You mentioned people might move to other jurisdictions and I think that is certainly something that happens. People also might move to different industries and I think that's something that it's harder to measure the cost of that. I've talked to young people who, you know, some of the brightest smartest young people who want to work in an area of digital assets and they've told me that because they've seen the cost of regulatory ambiguity on people they know, they're just not willing to work in that area. In fact, I've talked to older people who are well established in their careers who say, 'Hey, I have something very interesting I want to work on related to digital assets, but I mean, I have a whole career. I'm not going to throw it out by running into the possibility that a couple years from now if my innovation is successful, someone is going to come and tell me, well, you broke the law.' And so having clear rules is really important to providing the framework within which good smart people can innovate.
But on the flip side of that, when you have regulatory ambiguity, it is a playground for bad actors because it is much harder for people who are trying to figure out how they can, you know, just investors or citizens trying to interact with the technology to figure out who is okay to interact with. Because in a world with regulatory ambiguity, you can't distinguish the good actors from the bad actors. There are no clear rules for people to follow. This Reg Crypto Assets, for example, that I was just talking about. The ability to have a disclosure framework and to point to disclosure, I think, will be very valuable. What we had in the world of regulatory ambiguity was that people who made disclosures actually were punished because they were the ones likely to face regulatory actions whereas the ones who didn't were more likely to get away with running off with people's money and facing no consequences. So it is far better to work with people in an open process. You want to be careful that you're not designing a regulatory framework for any particular industry player because you want to keep barriers to entry low so that new competitors can come in. But work with the public to develop a framework that makes sense and that is going to be much more protective of the public than one in which there's ambiguity and then arbitrary enforcement filling in the gaps.
