Commissioner, SEC
SEC's Peirce Disappointed With Crypto Regulation
SEC Commissioner Hester Peirce says she has been disappointed with the lack of clarity regarding cryptocurrency regulation and a more transparent system is needed. She speaks on "Bloomberg Crypto."
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About Hester Peirce
SEC Commissioner Hester Peirce, head of the agency’s Crypto Task Force, has participated in several interviews in recent months discussing the SEC’s approach to digital asset regulation. Peirce said the SEC “lost time” under its prior approach to crypto and described the current rulemaking process as “complicated and long.” She stated that the agency is working within a rule set but trying to develop one that serves both its congressional mandate and the objectives of market participants building “real things.” Peirce advised the crypto industry to “build useful things” that meet actual human needs and cautioned that “enforcement is not shut down here at the SEC.” Peirce expressed support for principles-based regulation and inter-agency harmonization between the SEC and CFTC. She said she would eliminate the accredited investor definition, calling it “contrary to American principles.” Peirce also stated that the SEC’s job “is never about whether the numbers go up or the numbers go down” and that assessing an enforcement program by counting actions is “difficult,” noting she believed some past enforcement actions were “unjustified.” She warned that the SEC “is not there to protect you” if someone takes money or lies to investors, and said regulators should sometimes “allow some immediate pain in order to have a system that is more resilient.”
Transcript (16 segments)
✨ AI-enhanced transcript with speaker attribution
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Reporter0:00
Let me first ask you about the question of jurisdiction. If you can, I guess, agree that FTT, FTX's token, is a security, would you be able to step into a business that's outside the borders of the U.S., operated from the Bahamas?
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Hester Peirce0:18
I'm not going to speculate about whether or not we have jurisdiction over any of the events going on at the moment. I think the questions around lack of jurisdictional clarity are partly our fault because we've had opportunities. We've been asked time and again to provide more clarity about where our jurisdiction lies, and we've not done so, and that's part of the reason that you all have the questions that you have right now.
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Reporter0:46
Well, we just heard from Republican Senator Pat Toomey, who put out in a tweet that the crypto sector has been operating with far too much ambiguity because regulators refuse to give well-meaning actors clear guidance, and lawmakers refuse to act. So obviously, you would fall into the first part of that basket, Commissioner. Why has this happened so slowly? Why can't you regulate this industry more quickly?
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Hester Peirce1:09
We've been unwilling to work with people in the industry and people who are interested in participating in the industry to develop guidelines that make sense for the industry. We've instead preferred to take an approach that's rooted in enforcement, and often the enforcement actions come very late, and they come after relatively small actors in the market. And it's just not a good way to do the hard work of thinking about what a framework would actually look like.
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Reporter1:39
Do you need Congress at some level to tell you which parts of this industry you ultimately should be responsible for? I mean, is it up to you entirely, or do you need some assistance from others in Washington, D.C.?
H
Hester Peirce1:52
That's a great point, and it would certainly be helpful to get Congress's decisions around who they think should be regulating in this area. If they think the SEC should be regulating these crypto trading platforms, for example, to get that directive from Congress would be quite helpful.
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Reporter2:09
You know, I'm curious here as well, because in a tweet that was a bit earlier by Elizabeth Warren, there was a mention of enforcement and a lot of reaction from the industry, frustration from Brian Armstrong, Brad Garlinghouse, really kind of saying that there is no regulatory clarity, as you were hinting at before. Do you think that the next couple of years will be a lot more of the same, enforcement and enforcement, or will there be real rules of the road after what we saw with FTX?
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Hester Peirce2:36
I've been very disappointed with the way that U.S. regulators, and particularly the SEC, has approached this. It has been using enforcement, and in some ways it's because it changes the dynamic of the conversation if you're having it in an enforcement action versus having an open public discussion about what the right regulatory framework for this new and emerging industry is. Yes, there are places where it can slot into the existing regulatory framework, but there are areas where you do need to make adjustments, and so that has been a problematic approach.
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Reporter3:11
I'm really curious about what you think of a comment made earlier this week by Coinbase's CEO, Brian Armstrong, on Bloomberg Television. He said that he thinks that there are a lot of people in D.C. who probably feel duped or deceived by Sam Bankman-Fried. Remember, in addition to lobbying for the industry, he had also been a huge political donor. How do you think that lawmakers feel not just about Bankman-Fried, but about the industry given the trust that might have been breached in a situation like this?
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Hester Peirce3:39
Well, I don't want to talk about any individual person or entity, but I will say that the idea behind many of these innovations in crypto is really to move away from centralized entities or particular people and to look at on-chain development of innovation. On-chain activity, which is transparent, which anyone can audit — you have to have the technical expertise to do it — but it's out there for everyone to see, can be audited, and everyone interacts with it on the same terms. That transparency and that decentralized nature is what a lot of people in the industry are striving for. And so what happens at particular centralized entities is obviously relevant right now, and there are potentially a lot of people who are suffering consequences of the same kinds of problems that we see in the traditional financial industry. But the goal is to move toward this more transparent, more decentralized, more resilient system.
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Reporter4:45
Have you, at the SEC, Commissioner, already started receiving complaints from American investors worried that they will not be made whole by FTX.com?
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Hester Peirce4:56
Well, I think we've been seeing a lot of concerns, the same concerns that others are seeing. And again, this is another area where the lack of regulatory clarity is really problematic, because if we're not going to have regulatory authority, we need to tell people that you have to be particularly aware that if there's a problem, you cannot come to the SEC for relief. And the ambiguity has not served the American public well either.
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Reporter5:26
What do you think more broadly about charges that Jamie Dimon, for example, has made, and others, about Bitcoin being a giant Ponzi scheme? If that were the case, it seems like something that the SEC would be concerned about.
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Hester Peirce5:42
Markets are about people coming with their different opinions and different views on value of different assets, and coming together and working that out in the marketplace. So what we should be doing as a regulator is allowing these markets to work and not standing in the way of the markets working and people bringing those different valuation opinions. That's what we do for other asset classes, and that's what we should do for this one as well.
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Reporter6:09
Considering the scale at which we've seen a lot of firms really lose customer money this year and file for bankruptcy — we're not saying that's necessarily happening yet in the case of FTX, they are looking for funds, but it could be a reality if they can't get those funds secured — do you think, Commissioner, that the tone among regulators and with the industry has the risk of becoming more hostile than it's already been?
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Hester Peirce6:35
I think that we can take a moment like this and use it to turn to a more productive approach. Again, this is not an approach that says anything goes. It's an approach that says we have these mandates to protect investors, facilitate capital formation, and make sure the markets have integrity. We need to make sure these mandates are being abided by here, but we can work with you on the way to get there. So this is the moment for us to take a more productive approach, and I think one that will end up being better for everyone involved. So that's what I would like to see us do from this moment on.