Hester Peirce, the Commissioner of the SEC, became popular in crypto culture last year after she voiced her opposition for the agency’s choice to reject the request for a Bitcoin exchange-traded fund. The community adopted her as their “Crypto Mom,” and it appears that the former lawyer has the greatest appreciation for the SEC’s five commissioners, showing that she is someone who will champion for their victories.
On Wednesday night, she became the subject of an interview by Laura Shin at NYO, speaking on the work involved with innovation in this space, even if it initially is at the disadvantage of the investors. Her goal is that the SEC will be able to evolve and make a space for itself in this modern world of finance, despite being founded almost nine decades ago. Most of the values they hold are still true to those times, and even just establishing a decision on these types of matters is incredibly difficult.
Realistically, Peirce does not believe that the SEC is working hard enough to be an advocate and a partner to the crypto industry, which includes the investors and entrepreneurs in it. From the innovation perspective, Peirce said that the agency has “not been great,” basically avoiding the crypto boom. With better guidance two years ago, the way that the ICO boom transpired could’ve gone better. The laws that the SEC has established on securities have basically roped in utility tokens as well, but there’s so much uncertainty. Peirce expressed her desire to see “a bit more action” in that way.
One of the tests that the SEC uses in the definition of a security token is if investors are able to make money from a project or are led to believe that they can. However, that leads some people to wonder how the SEC could even get in the head of an investor to make that assumption. Peirce pointed out that one colleague may not feel the same as another in terms of opportunity. Considering the potential for appreciation in value, Peirce says that this kind of logic would ultimately lead the SEC to basically
“expand the jurisdiction to everything people might buy.”
Peirce brings up the fact that investors still have to take some level of responsibility for the actions that they take. Despite being the “mom” of the industry, she still believes that the investors need to take on some role in this process. The SEC rejected the Winklevoss ETF because they did not think it was good for investors, rather than the rumors that spread that it was not able to maintain a positively functioning market. Ultimately, the SEC doesn’t understand the markets that surround the value of the ETF, and that the product itself wasn’t deemed bad.
Right now, Congress has the Token Taxonomy Act on the table, which would make it possible for securities regulations to omit utility tokens. Members of both parties are in support of this possible change, but the actual passage of the act into law appears to be somewhat unlikely. As Peirce sees it, to gain support from the SEC on the crypto industry, it is not entirely necessary for Congress to establish new laws. However, considering the apathy that the SEC has expressed towards crypto, establishing a law may create a longer-lasting demand.
One of the greater challenges for regulators appears to be automated crypto exchanges, since they are used to putting the blame on human error instead. Peirce explained that she does not want the SEC to end up choosing “to outlaw writing code,” but she also does not want coders to have to worry about what someone else will do with their open protocols. That being said, there’s a certain balance that the regulator has to achieve to cover decentralized exchanges, like Idex or 0x.