That just finished talking about digital assets and regulation, and now we've got Commissioner Peirce, crypto mom herself, to join us for today. So, let me just give 30 seconds on Commissioner Peirce's history at the SEC and then we'll dive right in with a few questions. And again, Commissioner Peirce, thank you so much for joining us today. Okay. So, Hester Peirce was appointed by President Donald Trump to the SEC and was sworn in on January 11th, 2018. Prior to joining the SEC, Commissioner Peirce conducted research on the regulation of financial markets at the Mercatus Center at George Mason University. She was a senior counsel on the US Senate Committee on Banking, Housing, and Urban Affairs, where she advised ranking member Richard Shelby and other members of the Committee on securities issues. She served as counsel to SEC Commissioner Paul Atkins. By the way, when Commissioner Peirce was serving Commissioner Chair Atkins, I was serving another SEC commissioner. So, we got the opportunity to work together as very young lawyers. We're still young, by the way. Commissioner Peirce served as, she also worked as staff attorney in the SEC's division of investment management. She was an associate at Wilmer Cutler and Pickering, now WilmerHale, and clerked for Judge Roger Andewelt on the Court of Federal Claims. By the way, notwithstanding the Yale Law School, the most impressive credential to me is she's also a Buckeye. Did not go to Ohio State, but hails from the great state of Ohio. So, Hester, thank you so much for joining us this morning.
Well, Kier, thanks for having me, and I'm glad you mentioned that we worked together all those years ago. It's been fun watching your career since that time. I've always been impressed. But I, and so I'm honored that I can be part of today's event and I'm sorry that I'm not Richard Gabbert who is the head of the crypto task force and would have been here today were it not for the shutdown. I still have to give you my disclaimer which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.
Great. Thank you. We appreciate that and again so thrilled to be here. Your humility is just very much appreciated. Okay, so I'm going to get us kicked off and then we've got this all-star panel who basically we crowdsourced the questions. So I'm going to kick it off, but if you all want to jump in, please do. You all saw the questions that we shared with Commissioner Peirce in advance. So this is a total softball. But how does the SEC plan to provide greater clarity on when digital assets are considered securities versus commodities or other types of assets? Maybe that's not a softball, but it's a question.
Yeah. Because the government is shut down, so we really can't do anything right now, which is unfortunate. It has really put our timelines back, which is, you know, now that it's been a month, it's actually a pretty material change, but I think we are looking at ways that we can provide more clarity. We've provided some I think through staff guidance about some things that you know fall clearly outside the SEC's jurisdiction but looking at a way that we can provide some interpretive guidance about where we think, how we think about what fits within which bucket and I think that could be quite helpful to people just to allay their fears. I mean, you've already gotten the top level change, right? Chairman Atkins says that most digital assets that we see now are not securities whereas Chairman Gensler said the opposite. So we have definitely changed how we look at things. But I think providing some more context around why that is would be helpful for people.
I think this group would agree. I think you mentioned the guidance that we now have from Chair Atkins. I think one of the questions that we've debated really over the last two days as part of this conference is around durable change. And so when I think about, you know, this panel talked about the Howey test, you've got case law and years of development on that case law. How do we create durable change? And to be specific, would you prefer to see some version of Howey codified in a statute? And if so, what changes would you make to the case law that's developed around the Howey test?
I wouldn't mind seeing some codification of Howey. I don't think that's really a crypto specific concern that's driving me to say that. I think that there has been some uncertainty around what exactly gets pulled in and why with Howey. We've used it for example with pyramid scheme type things which again trying to capture activity that we feel should be regulated but maybe doesn't naturally fit within one of the buckets in the definition of security. So it kind of gets shoved into investment contract. And I think the stretching that we've done to try to use the Howey analysis to pull in crypto really illustrates for me that it would be helpful to have some more clarity around what Congress intends us to capture. And then if there are other things that we need to capture, they could maybe create separate categories for that. But I mean, that is not really my primary objective and I don't know whether or not that's something that the legislation will include. I think there's a lot that can be done without trying to revisit Howey or codify some definition of investment contract. I think there are just some sensible lines that we can lay out that would go a long way to providing clarity, whether that's in regulation, which is pretty durable, or whether that's in legislation, which is obviously more durable and I think durability is something we should care about.
All right, I'm going to ask one more question and then I'm going to look at my esteemed co-panelists. One question that we came up with is, you know, how much token classification do you think the SEC can address without market structure, so changing from the product itself into kind of the ecosystem at which that product could be bought and sold or held?
I mean I think we can do a lot with the authority we have now. Some of the conclusions that we come to maybe that they're not securities and so some people might decide that they want some other regulatory framework for that in which case that may be something Congress needs to do through legislation. But I think we can do a lot of the classification with the authority we have now.
Mr. Drummer.
Okay. Host.
Okay. So, you know, just maybe a little pick up on that last idea, which is kind of, you know, we live in Washington. You know, we have slowdowns at some points in time. You know, you think about clarity, and I try to tell our friends here in New York, it's a little bit sometimes like the weather. Oh, it's a little more sunny today, and you know, clarity is a little cloudy today. And so, it's a little bit difficult to sort of figure out where the puck is ultimately going to land. You know, from an agency perspective that gives you some really interesting choices. One is do you sort of direct the guidance processes towards providing kind of a temporary rail towards the expectation that you will have legislation sort of to queue it up or is your mindset, you know, regardless one way or another we're kind of going down and creating the kind of clarity and rule making that's going to be durable and effective. I mean, to what extent does the legislation or the prospect of legislation impact how you go about doing your job when you know it just sort of changes from day to day or month to month as to the timing and perhaps even likeliness of that legislation?
Well, we certainly want to be respectful to the role that we have, which is very different than the role that Congress has. And so I think we're always trying to be helpful to them as they think through the challenges of writing legislation. And it is very challenging. I think it's quite impressive the amount of work that Congress has been able to do on this topic, the House putting together its framework. The Senate is working hard on its framework. So we want to be as helpful as we can to that effort. But I think under the authority that we already have, we not only can do some of the work in providing a categorization and providing people some rails or some ways that they can register things and really giving life to the 'come in and register' right? We can do some of that work and we don't need new authority to do that. And I think it's not only something that we can do but something that we should do because it's authority that we already have.
So I'll jump in on a question that actually we just had a conversation on this panel about a few moments ago. So first of all let me say I'm not sure I'm a fan of digital assets. I'm not sure. But I am definitely a fan of blockchain. I love the promise that blockchain has not just from a financial product perspective but also the utility of blockchains. One of the questions that we were just talking about was, you know, at what point, to what extent should the blockchains themselves be regulated as opposed to the products that are created and traded or are held on blockchains. So Kier, you're not going to create Buckeye bucks.
I would love that. I'm all in.
Well, I think that blockchains can be a lot of different things and they can be used for a lot of different things and there are different types of blockchains. So I think if you have a public blockchain that there isn't a need to regulate a public blockchain, you may regulate what people use that blockchain for. Or you may have a blockchain that is essentially operated by a small group of people and you may regulate what they do. But I think in general I'd say regulating blockchains is not the right way to go.
Marie, good answer.
Yeah, we just talked about it. So I feel like we got the answer right.
I think Corey, I think that the expert, and that made me feel better that I passed the exam. But Henry, did you ask my question? Yes. Oh, I'm sorry. Sorry. I'm so caught up in this. So one of the other things that we talked about on the previous panel, Commissioner Peirce, was the amazing work the crypto task force has done, the way that you and the team have been so open to industry views and I think maybe one of the most iconic moments in that journey for us so far has been your 'there's got to be some way out of this' statement and your request for information from the industry. And I was saying there was I think at the end of the day maybe like close to 80 questions and sub questions across that request for information. And I'm just curious like were you pleased with the industry's response to that initiative first of all and then what were the areas that surprised you the most from a feedback point of view if there was anything surprising?
Yeah. Well, I am pleased that we've gotten a lot of great responses and substantive responses. I think that some people are still sending those in, which I encourage because they're still very valuable. I don't know that I was surprised by anything except that I have been I guess a little bit surprised by the amount of interest there is in tokenizing traditional securities and maybe I shouldn't have been surprised by that. But that has been sort of one big theme of the feedback that's come in through that request and also just more generally through our rounds and meetings with people.
One of the things, and if I can ask a second part of that, one of the things to that topic that I think is really important and an idea that I had that seems very antiquated because I was at the SEC a million years ago was, and I spoke to Chair Atkins about this as well, is how do you approach that issue, right? So you have all these different market participants that want to do things differently potentially and infrastructure that could be completely updated across the board using blockchain technology and do you do that in a piecemeal fashion? I mean one of the things I was thinking about from when I was at the SEC was that trading and markets put out Market 2000 which was just a holistic view of how electronic trading can change the market across the board. Do you do something like a Market 2000 around blockchain infrastructure for public equity trading or do you try to do it piece by piece? It's such a huge challenge and there is so much interest in tokenized securities trading. But how do you solve that versus a holistic approach versus a piece by piece approach if you have a view of that?
I am glad that you pointed to Market 2000 because that is something that it's worth going back and thinking about, but I'm a little bit reluctant to have this project just be one of producing reports because I think people are really eager to try to experiment with things. And so my preference really is to let experiments happen with the idea that the ones that gain commercial viability will be able to continue and will be able to continue without a break. Right? So they'll be able to run an experiment and then work themselves into a, to use the word of the day, a durable set of rules that they'll be able to operate under. But I think that as you know, Anne Marie, this is not an easy thing because trying to tokenize securities touches on just so many different aspects of the regulatory framework. And it's somewhat nice that it's coinciding with a chairman who is thinking more broadly about equity market structure rules, which have tended to be quite top down from my perspective, quite prescriptive and unnecessarily so. And so maybe this is a way for us to challenge those prior rules and say we ought to look at those and make sure that they're working as we want them to and that they're not too heavy-handed. So I think that's how we're trying to approach it is allowing people to experiment and then figure out which experiments are successful.
It's going to be very exciting. But it's interesting to see like if every national exchange will come to the same place, right? Because you have NMS and you have to do order flow in a certain manner and you've had centralized intermediaries that exist right now that are not blockchain enabled. And so that's so many really cool things to solve for. And we're very excited to see, you know, how you move forward on that.
I think it is kind of interesting because there's going to, there is already a lot of experimentation. I was just over at Swift headquarters two days ago and you know, I gave a talk there but then I just literally sat around for 5 hours watching the banks and stock exchanges giving internal demos as to what they're experimenting with. You know, is there a sense, like how do you, I mean there's going to, there is so much going on. Do you prefer for folks to sort of send in on Instagram, you know, pictures of their demos to you guys? I mean, you know, what's, you know, along with their Nelly videos? No. I mean like how exactly, you know, do you think the, or would you prefer for these kinds of experiments to be communicated to you as they are getting underway?
