The U.S. government needs to provide more clarity and guideposts for crypto regulations — and better cross-agency coordination is needed, said U.S. Securities and Exchange Commission (SEC) commissioner Hester Peirce in an exclusive interview with Forkast.News Editor-in-Chief Angie Lau.
“It is really quite challenging right now for projects, and people are thinking about different ways to do that in a way that‘s compliant. But there are no easy answers because we haven’t provided that clarity on how to do it,” Peirce said.
The SEC‘s recent lawsuit against cryptocurrency platform Ripple Labs Inc., its CEO Brad Garlinghouse and Chairman Chris Larsen for allegedly raising over US$1.3 billion through the sale of the company’s cryptocurrency, XRP, in an unregistered securities offering has also intensified industry concerns regarding different U.S. agencies being misaligned or even at odds with one another over their individual rules and policies toward digital assets.
According to Peirce, each agency has its own rulebook to follow. “I think that‘s not only a problem with respect to digital assets, it’s actually a broader problem because we have this very open-ended category called an ‘investment contract’ thats intended to capture anything that looks like a security and acts like a security, but might not be called a stock or a bond,” Peirce said. “So something might be characterized as one thing by another agency, yet still be a security under our rules.”
With a new Presidential administration coming in, the leadership at federal agencies is also in a state of flux. The SEC ‘s charges last month against Ripple were brought when Jay Clayton was still chair of the agency. Clayton has since left the SEC, and Elad Roisman is now the acting chairman. But SEC’s leadership will likely soon change again. After U.S. President-elect Joe Biden is sworn in, he could make new commissioner appointments that could reshape the agencys rulemaking and enforcement actions in the months ahead.
“I do think that there‘s interest, generally among institutional investors, to see more clarity in the space,” Peirce said. “As the industry matures and gets more people involved, I suspect we’ll feel a little bit more pressure from the outside too.”
Not only could a new administrations appointments lead to greater regulatory clarity for the industry in 2021, but Peirce also expects the SEC to tackle decentralized finance (DeFi) regulations for the first time.
“We can provide clarity with respect to DeFi, which is something that we havent talked about yet, but I think has had quite a year in 2020,” she said.
Peirce is currently serving her second term as one of the SEC‘s five commissioners. She is also known as “Crypto Mom” because of her positive regulatory stance on digital assets. Prior to joining the SEC, Peirce was the director of the Financial Markets Working Group and conducted research on financial markets regulation at George Mason University’s Mercatus Center.
Peirce emphasizes that the views expressed during this interview are her own and not necessarily those of the commission or her fellow commissioners.
Watch the full interview with Peirce and Forkast.News Editor-in-Chief Angie Lau to learn more about the commissioners perspectives on the SEC lawsuit against Ripple, crypto regulations across different government agencies, her three-year safe harbor proposal for token sales, and what could lie in store for DeFi in 2021.
Highlights
What the SEC‘s lawsuit against Ripple means for the crypto industry: “I don’t want to speak to any particular cryptocurrency, whether it‘s in litigation with us or not in litigation with us. But I think everyone has to look at the facts and circumstances. And that’s why I have called for more clarity, because I actually think it can be difficult to determine whether something fits within the security bucket or not. And I think we could do more to provide some guideposts for what that would be.”
On regulatory clarity across agencies: “Im hopeful that we will — the SEC will — take some more steps to provide greater clarity. But it has to be a combination of legislative potentially, and then each agency working individually to address specific questions in its domain, and then having some cross-agency work — which is happening — but I think we could do more cross-agency coordination.”
Whether her proposed three-year safe harbor period for crypto token sales will become a reality: “A lot is going to depend on who the chairman is under President Biden. And that will help determine the direction that the commission goes on a lot of issues, cryptocurrency being one of them. And so, it remains to be seen.”
How the SEC can improve on crypto matters: “I want us to do better. [We] have people at the agency who care a lot about the space… but I think that the rate of activity on our part has been rather frustratingly slow, and that has real concrete effects on businesses that are trying to get into this space.”
On regulating decentralized finance (DeFi): “The concept of decentralized finance is a really fascinating one. It is one that‘s going to be challenging to us because most of the way we regulate is through intermediaries, and when you really build something that’s decentralized, there‘s no intermediary. It’s great for resilience of a system. But it‘s much harder for us when we’re trying to go in and regulate to figure out how to do that. And so thatll be a new challenge.”