SEC Continues Regulation by Enforcement Against Crypto: Hester Peirce
US Securities and Exchange Commissioner Hester Peirce has recently expressed her concerns about the SEC’s approach to regulating the cryptocurrency market, emphasizing the need for more proactive and clear guidelines rather than relying on enforcement after the fact. In a candid discussion at ETH Denver, Peirce criticized the agency’s slow processes, particularly in approving spot Bitcoin exchange-traded funds (ETFs), and called for a collaboration between the crypto community and policymakers.
The Slow Approval Process and the Grayscale Case
Peirce highlighted the US handling of the Grayscale case, which resulted in the approval of a Bitcoin exchange-traded product, as an example of the agency’s inefficiency. “It’s remarkable to me that it took a court to tell us that we had to do that,” Peirce remarked, pointing out the unnecessary delays in decision-making that could hinder the growth and innovation within the crypto industry.
Calling for Clear Rules and Collaboration
One of the main criticisms from Peirce is the US Securities tendency to “regulate by enforcement,” which she believes creates uncertainty and fear among crypto entrepreneurs and investors. She proposed the idea of a token “safe harbor” that would allow crypto projects to operate within a basic legal framework while striving for decentralization, echoing a bill introduced by U.S. Representative Patrick McHenry and her previous proposals aimed at fostering innovation within the regulatory framework.
Acknowledging the Need for Enforcement
While criticizing the US approach to regulation, Peirce did not dismiss the importance of the agency’s role in prosecuting fraud within the crypto space. She acknowledged the SEC’s enforcement actions, which resulted in nearly $5 billion in fines and reimbursements to investors in fiscal year 2023, underscoring the necessity of a balanced approach to regulation that ensures investor protection without stifling innovation.
A Call for Change in Stance
With SEC Chair Gary Gensler’s critical stance on the noncompliance of the crypto industry with securities laws, Peirce’s comments underscore a growing call for a shift in how the SEC approaches cryptocurrency regulation. By advocating for clearer guidelines and a more collaborative regulatory process, Peirce represents a voice within the agency pushing for change that could lead to a more robust and innovative crypto ecosystem.
