SEC Commissioner Hester Peirce—who has been calling for clear and flexible approach to regulating the digital asset market—believes that when a new SEC chair comes this spring, it will be a good time for renewed conversation about the commission’s role for the crypto market.
“I think it’s a good time to have a fresh start,” Peirce said during a webinar titled the Decentralized Enterprise and Future of Work hosted by Blockworks on Feb. 2, 2021. “That I think will be something that’s positive for crypto markets.”
This comes as Peirce, also known in the industry as “crypto-mom,” has been ubiquitous at digital asset-related conferences, especially in the past several weeks, sometimes speaking at two different events in a single week.
Currently, President Joseph Biden’s pick to lead the SEC, former Commodity Futures Trading Commission (CFTC) chairman Gary Gensler, is waiting for Senate confirmation. The process has just begun with the White House formally sending the nomination to the Senate on Feb. 3.
Peirce is optimistic about a fresh look at digital asset regulation and the SEC’s role because of Gensler’s cred on crypto. As a professor of practice at Massachusetts Institute of Technology (MIT) Sloan School of Management, he has taught not only finance but has also been co-director of MIT’s [email protected] and senior advisor to the MIT Media Lab Digital Currency Initiative.
So far, the commission has focused more on enforcement and regulation of crypto assets if they function like a security under federal securities laws. She has been calling for a safe harbor of three years from certain regulatory compliance for the emerging industry so entrepreneurs can freely innovate. This approach has been so far rejected by a majority of the commissioners.
Peirce said she has known Gensler for a number of years and has had a chance in the past to talk to him about a number of issues, including crypto.
“When he comes in, he’s gonna have a lot on his plate. There is a lot going on right now as everyone knows, and there are priorities that the administration has laid out, many of which have nothing to do with crypto,” she said. “But I expect that given his knowledge and given the developments that have happened in recent years, it really is incumbent upon a new SEC chairman to take a fresh look to think about how we’ve approached the issue, which as you may know I have had some concerns about our approach.”
Thus, she said she is optimistic that the new administration will be willing to engage “more seriously” for the fast-growing industry.
“But it remains to be seen where it falls in the priority list,” she added. The chairman sets the regulatory agenda.
Perianne Boring, founder and president of the Chamber of Digital Commerce, agreed that it is time for a fresh start.
She said that she is worried about the tone and tenor towards cryptocurrencies and blockchain technologies in the United States.
“A lot of the activities, a lot of the conversations, a lot of the hearings, a lot of the things that are happening out of Washington that involve our space come from a place of trying to protect it and mitigate against the risk against the bad actors,” Boring said during the webinar. “And it’s time to make one, blockchain a priority in the United States. And two, change the tone.”
She acknowledged there will be risk, but she said there is always a risk to any technology. She emphasized that there are many benefits from creating jobs to promoting national security. In her view, America should foster the technology so that the benefits can be reaped by companies, investors, and consumers alike.
“If not, we have everything to lose,” Boring warned. “We’ve seen many investors, many businesses, many people leave the U.S. because of the lack of clarity. Hester Peirce just talked about the priorities [of the new administration]…. I think it would be a huge miss if they don’t make blockchain a priority within its policy agenda. They absolutely still have the time to do that and to come out with some statements to include that in their policy agenda.”
Boring urged the Biden administration not to put digital assets into a regulatory box that was established decades ago for other products and services.
“This requires a dedicated look and dedicated study, and it may require new laws and new regulations,” she said. “But we definitely need regulatory clarity in many areas across federal and state government.”
She is concerned that for example, in the DeFi marketplace, regulators will come in and stifle innovation. DeFi is decentralized finance. While most of activities have been on yield farming, the nascent industry may grow to provide other benefits, like financial inclusion.
“But if we come in and regulate too early, we can prevent that from ever happening,” she said.
Peirce agreed with Boring that crypto deserves its own regulatory framework. When she first got to the SEC in January 2018, she did not think the commission needed to make wholesale changes or give special exceptions for crypto.
“But my couple of years at the commission have really showed me, I think there is a need for that kind of thing,” she said. “DeFi has certainly been an interesting thing to watch over the last year…. I always worry that what will happen is something similar to what happened in 2017, with the ICOs [initial coin offerings], which is that there is a lot of activity and then several years later, there comes enforcement activity from regulators. That’s not my preferred approach, my preferred approach is to set out some rules.”
For more information on this topic, or to learn how Baker Tilly SEC accounting specialists can help, contact our team.
We have partnered with Thomson Reuters to issue our monthly SEC Accounting Update. © 2021 Thomson Reuters/Tax & Accounting. All Rights Reserved.