Not Just a #crypto Mom: Why Hester Peirce is the Voice of Reason in a Digital Age #web3

Hi, thanks for having me. It's great to be here, especially with a fellow Ohioan.

Go Buckeyes. I do have to give my disclaimer, which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.

Well, I have to say it's very helpful to me because I'm able to get input from lots of different people. And so people have been very generous with their time with me. So I'm very grateful for that.

Yeah. Well, I'm a Cleveland native. I grew up there and neither of my parents were from Ohio, but both of them loved it a lot. So, I consider that still to be home. And I ended up studying economics in college. And that really was for me transformative in the way that I looked at the world, understanding, you know, you can understand so much when you just apply basic economic principles. So, that was something that I had thought about going on to study, but ended up in law school anyway. Instead of going to get an econ PhD, I just went to law school, which is better for someone who's not great at math. And so, wanted to have some way to marry those two, economics and law. And so, securities law was a good home for me to land in. And that's where I did land and found my way to the SEC as a very young junior lawyer and really got the chance to learn about how not only the securities markets work but also how regulation works. And regulation is, you know, you can have a great idea, but putting that into a rule actually is more difficult than you would think. So learning how that worked was very important for me. And so I had a chance then to go and work in Congress as you mentioned there. I had the chance to think about how does Congress come up with the mandates for regulators to implement and that also is quite difficult because you're trying to give a mandate that is cabined enough that you're not granting overly broad authority, but you're also trying to give the agency room to work as conditions change. And so that was a really valuable experience especially since I was there during the financial crisis and in the aftermath. And so you get a sense of the consequences of bad regulation, of bad regulatory decisions. You know, you really learn humility because a regulation can tell people to do things and if everyone's doing that same thing that's required by the regulation and it's the wrong thing, it will have very dire consequences for the financial system. And then I went, so as I said, you know, thinking about how to do regulation effectively is something that I've been thinking of for a long time in my career. So I went to work with folks at a research center who worked a lot on regulation, a lot of those were economists to try to learn more about how to do regulation well. And then I got the opportunity to come back to the SEC as a commissioner and really thought it would be fun to have a hand in making policy, which it has been fun, of course, very challenging. And so I've had a good time here and I've learned a lot. I feel like there's still a lot of work I'd like to get done, but it's been a very interesting journey.

Yeah. So what happened is when I got here in 2018, there were sort of the first glimmers of the interaction of the SEC with the crypto world. And there were a lot of questions about how the securities laws applied. And there were a lot of questions about what we needed to do as an agency to think about how the laws applied and to help people on the outside think about that. And I took it as an opportunity to think not just about crypto but more generally about how the agency interacts with innovation. And so regardless of what you think about crypto and whether you think that this particular innovation will be meaningful in our lives, the agency has a responsibility to interact responsibly with innovators to give them the opportunity to make their products and services available to the American people. And so that was really how I approached it. I knew from my time here before at the commission as a staffer that it can be very easy for an agency to get comfortable with the incumbent providers of services and with the incumbent products and not to create an avenue for new competitors to come into the industry and for new products and services to come in because if something goes wrong with one of those new competitors or one of those new products, you will get blamed as a regulator later. Why didn't you say no? But if you just say no, it's less likely that people will see there's a cost to that. And so crypto presented an interesting example of that interaction with innovation. And people were saying, wait a minute, I see stuff happening outside the US. Why isn't it happening inside the US? And the answer was really regulation. And so that piqued my interest. I think there are some really interesting aspects of crypto in the sense that the underlying technology enables value to move across the internet in the same way that data could move across the internet and that was revolutionary. It also enables people who don't know one another to coordinate their activities with one another and I think that's a fascinating development too. But as a regulator, I don't try to decide whether a particular technology is going to change the way things are done. I really just want to give people the opportunity who are the technologists, who are the people developing and building, give them the opportunity to show people what the technology can do. And if people find that to be compelling, they'll start using those products and services. If not, they won't. And the market should be able to make that decision.

No, I talk to lots of people. And I mean, I think that's a really important question because the term crypto can mean a lot of different things. As I said, the underlying technology, cryptography, allows you to transfer money to someone else virtually over the internet, right? But to do so in a way that you know, you as the recipient know that the sender didn't also send that same money to 10 different people. And that's because there's a blockchain and you can actually, it's public, it's open, people can see that you're not double spending. And so that in itself can really change the way people do lots of things, right? It can change the way people send money across borders. It can give people the ability to make small payments, micro payments for things. So there are a lot of potential applications for that. You've seen people create stable coins which are based on dollars so that they can easily transfer dollars. And so there's that piece of it, but you can also do other things with it. You can build networks and the token is a crypto asset on that network and enables you to do all kinds of things where you want to coordinate people's activities. So, you know, you could use it to build a social network. You can use it to build a network where different people are storing data or building a sort of cell phone sharing cell networks. So, there are a lot of different potential uses of it. And I always recommend that when you want to go learn about it, you don't go to a regulator, but you tune in to some of the people who are actually building in this area.

Well, so the name came pretty early on in my tenure when I wrote a dissent. One of the things people are trying to do is, so there are these crypto assets out there and they're trying to figure out a way to give people access to those through a regulated product of the SEC. We have exchange traded products and so people have created exchange traded products that are based on Bitcoin and based on Ether, one of the other crypto assets that's out there. And so we said no to those for a long time and I put out a dissent saying I thought we should say yes. And so I got the name Crypto Mom. And I will say that I think it's really important for people to understand the role of the SEC. And the role of the SEC is not maternal or paternal. It's quite the opposite. It actually is, our mission is to get people information so that they can make their own decisions. They can make decisions for their own lives based on their own knowledge of their own plans for the future, their own limitations in terms of what does the rest of their portfolio look like? What might their immediate needs be for money? You know, if you're planning to buy a house, you'll choose to put your money in one place versus if you have money that you're sitting on for a long time and expect to be sitting on for a long time, you might put it in some other place. And so what our goal is is to make sure there's good disclosure so people can make good decisions, but not to make those decisions for them. So I think the term crypto mom is funny and that's fine. But I really want people to focus on the fact that nobody is making those decisions for you. You have to take charge of your financial life. That may include going and finding a financial professional who can help you make good decisions. You should always check that professional out. We have databases where you can go to check out a financial professional before you start to work with the person. And so I think just don't assume that because a product is trading on our markets, it means that we at the SEC have signed off on it. That is not our function.