The SEC’s Hester Peirce has seen ‘no real movement’ in the SEC’s crypto regulation since she joined in 2018.

If the focus of the crypto industry is still on trading crypto assets, it is a sign that the industry has not fulfilled its potential, according to

Securities and Exchange Commissioner Hester Peirce often feels she is “on an island alone” within the SEC. “I look at these things differently than some of my colleagues.”

That’s an understatement. While SEC Chairman Gary Gensler has made it very clear that he views most crypto assets as securities that require registration with the SEC, describing the industry as the Wild West, Peirce, one of five commissioners at the U.S. banking regulator, has long been open to crypto, though in his own words, “I’m more in favor of people being able to try things and experiment with things, and I think there’s been a lot of interesting experiments in the crypto space and I expect there will be many more in the coming years.”

Peirce spoke with Decipher last week for the latest episode of the gm podcast. She prefaced her comments, as always, by saying that they were her own and did not represent the views of the SEC. Peirce was originally nominated by President Barack Obama to be SEC commissioner in 2016, but the Senate did not act on her nomination until 2017. She is currently serving a five-year term, which is set to expire in 2025. “Because I’ve been with the SEC since 2018. , it’s frustrating to see no real progress—positive progress—in that time.”

She said she first heard about Bitcoin around 2012 and has been learning about the broader crypto ecosystem ever since. But her interests are broader than that, she said, adding that her optimism about the industry has more to do with her desire to change the SEC’s approach to innovative new financial products — crypto and otherwise.

“He wants to keep the door open to innovation, he wants to make sure the financial industry is not one dominated by a few big companies that keep everyone else out.” Because there are a lot of people with great ideas and I think it’s great that people are challenging the way we’ve been doing things,” she said.

FTX effect

At the time of Peirce’s interview last week, former FTX CEO Sam Bankman-Fried was not yet arrested in the Bahamas and the SEC hasn’t yet accused him of allegedly defrauding investors in society. As of Monday night, the Justice Department also filed charges, alleging he committed the crime conspiracy, fraud and money launderingand the CFTC plans to sue for violating commodity laws.

Cracks in FTX’s foundation began to show in early November, when a report revealed that the crypto exchange’s sister company, Alameda Research, was holding billions in illiquid FTT (FTX’s exchange token) on its balance sheet. A subsequent tweet by Binance CEO Changpeng Zhao mentioning these “revelations” triggered mass withdrawals from FTX. After a few days, FTX had to freeze the funds. The company initially sought a buyout from Binance, but eventually filed for bankruptcy on November 11.

Last week, Peirce said she was telling people that everything Bankman-Fried presented was not, in her view, the scope of the crypto industry’s potential.

“When I talk to people, I remind them of one thing: that crypto is not about centralized entities; two: crypto isn’t about trading either,” Peirce said. “Although there’s been a lot of emphasis on trading in the last few years, that’s not the core of what crypto is. And if it’s a core, it’s probably not living up to its potential. And third: it’s still early, so we still have a lot to see.”

Now that Bankman-Fried has been arrested and charged by multiple entities, Peirce’s warning about the regulatory frameworks emerging from responses to the FTX explosion is particularly prescient. What she hopes not to see, she said, is another major legislative push occurring before a thorough analysis is conducted, as was the case after the 2008 global financial crisis.

“I think we should all be careful about regulatory frameworks that are developed in the context of enforcement measures, because it’s very tempting for regulators to do that,” she said. “And it just shuts everyone else out of the process.”

She reminded that the recession of 2008 was the catalyst for numerous new regulations. The largest and most sweeping measure was the Dodd-Frank Wall Street Reform and Consumer Protection Act, which itself paved the way for the Consumer Financial Protection Bureau, the Financial Stability Oversight Council, and the Volcker Rule to limit speculative investment.

It is significant that only DOJ has he compared the collapse of FTX to Lehman Brothers. While Peirce said she has been vocal about not wanting to see a large wave of reactionary regulation, she recommends that companies in the crypto industry proceed with caution.

“I urge people: The reach of securities laws is very broad,” she said. “If you have any doubts — even if you don’t have any doubts — it’s a good idea to consider calling a lawyer.”

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