Crypto Regulation Stuck In “Enforcement-Only Mode,” Says SEC Commissioner Peirce
In a thought-provoking address at the ETHDenver Web3 hackathon, US Securities and Exchange Commission (SEC) Commissioner Hester Peirce expressed her concerns over the regulatory body’s handling of the cryptocurrency industry.
Known for her pro-crypto stance and support for blockchain technology, Peirce lamented the lack of clear rules and the SEC’s tendency to pass judgment on cryptocurrencies as an asset class.
Peirce Urges Clearer Regulations To Foster Crypto Industry Growth
Peirce highlighted the negative impact of regulatory uncertainty on innovation, noting that developers and entrepreneurs are forced to spend “precious brainpower” trying to avoid potential legal repercussions. At the same time, the SEC has gone into “enforcement only mode” rather than focusing on building transformative solutions.
Once again, the Commissioner called for clearer regulations to allow the industry to thrive, emphasized her frustration with the SEC’s tendency to stifle innovation by treating crypto with undue skepticism, and echoed the vast industry’s calls for an improved and updated regulatory framework.
In her speech, Peirce also emphasized decentralization’s inherent strength and resilience to the financial system. At the same time, the SEC extends its oversight to decentralized finance (DeFi) solutions with new rules.
The new rules, Exchange Act Rules 3a5-4 and 3a44-2, refine the definition of “in the regular course of business” in Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 and are designed to identify specific activities that would classify persons engaged in them as “dealers” or “government securities dealers.”
As a result, those who fall into these categories must register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations.
Peirce acknowledged the challenges the Securities and Exchange Commission faced, led by Gary Gensler, in grappling with decentralized networks and interactions governed by code rather than traditional entities. Peirce further stated:
When you have people working together and someone interacting with code instead of with a person or entity, it’s a real challenge for the SEC to figure out what to do with that.
Focused Application Of Securities Laws
Peirce suggested that the SEC’s role should primarily be to ensure securities laws are appropriately applied rather than attempting to understand and regulate the entire crypto space.
Peirce further expressed her desire for the SEC to adopt a more supportive approach, allowing projects to grow and achieve decentralization without the constant threat of legal action.
The Commissioner stressed the importance of providing a regulatory environment that encourages innovation and empowers individuals to make informed decisions. Peirce also cautioned against targeting those seeking clear guidelines for operating within the crypto industry, emphasizing the need for collaboration and a forward-thinking mindset.
As the SEC remains primarily focused on enforcement, Peirce’s remarks shed light on the necessity for the regulatory body to establish provisions that enable projects to flourish and evolve into decentralized entities.
By providing clarity, embracing decentralization, and fostering an environment that encourages growth, the SEC has the opportunity to support the development of a vibrant and innovative crypto ecosystem. However, all indications are that the SEC is unlikely to change its crypto crackdown in the coming months unless there is a change in administration following the presidential election in the US scheduled for 2024.
Currently, the valuation of the crypto market stands at $2.25 trillion, continuing its uptrend with gains of over 2% in the past 24 hours.
Featured image from Shutterstock, chart from TradingView.com
