SEC Commissioner Hester Peirce Concerned Crypto Industry Hindered by Regulatory Delays

Published at: May 9, 2019

United States regulator and so-called “crypto mom” Hester Peirce gave remarks in which she expressed fears that the cryptocurrency industry has been hindered by the Securities and Exchange Commission (SEC) dragging its heels. Peirce spoke at the Securities Enforcement Forum in East Palo Alto, California on May 9.

In her speech, Peirce stated that, given the rapid development of the digital currency industry, she worried that the SEC’s hesitance to provide clear guidance would hold back its growth.

The sticking point was, according to Peirce, how to decide when issuing tokens represented an offering of securities, especially considering that securities laws do not cease to apply just because there is a new evolution in the industry.

Peirce says that the SEC, as a regulator, has to provide industry players with clear guidance on how to comply with the law, which the agency has not yet done. She further noted that the agency’s “Jackson Pollock approach to splashing lots of factors on the canvas without any clear message leaves something to be desired.” Peirce continued:

“We should not be trying to guide innovation, but we also should recognize that we cannot stop it and embrace the potential for positive change that innovation offers. Our silence is likely to simply push this innovation and any attendant economic growth into other jurisdictions that have done their work and provided clear guidelines for the market participants to follow.”

The commissioner added, “The U.S. securities markets have historically been the envy of the world; I do not want heel-dragging by the SEC in crypto to mar that well-deserved reputation.”

In March, Peirce argued in favor of self-regulation for cryptocurrency markets when possible, during a public talk together with former Commodity Futures Trading Commission chairman Gary Gensler at the MIT Bitcoin Expo 2019.

At the time, Peirce advocated for a lighter regulatory touch when possible, nonetheless affirming that security offerings must comply with the SEC’s registration requirements. She also supported the ongoing efforts by major crypto trading platforms to register with the agency as either exchanges or as alternative trading venues in order to be able to compliantly list security tokens.

In February, Peirce proposed that the lengthy process of establishing cryptocurrency regulation in the U.S. may ultimately prove to be beneficial and allow more freedom for the industry to come into its own.

Tags
Blockchain
United States
Sec
Cryptocurrencies
Tokens
Law
Related Posts
Legal Implications of Secondary SAFT Sales, Part 2
The United States Internal Revenue Service and Treasury Department have published minimal guidance on the tax treatment of virtual currency and no guidance on Simple Agreement for Future Tokens or secondary forward contracts on SAFTs. Accordingly, it is difficult to determine the appropriate U.S. federal income tax treatment of a secondary forward contract on a SAFT. In 2014, the IRS issued Notice 2014-21 and updated it with FAQs that provided that convertible virtual currency is treated as “property and general tax principles applicable to property transactions apply to transactions using virtual currency.” Thus, a corporation’s issuance of such virtual currency …
Blockchain / July 8, 2020
Legal Implications of Secondary SAFT Sales, Part 1
The enfant terrible of the digital token world, the Simple Agreement for Future Tokens, or SAFT, continues to grab headlines. In the recent Telegram case, the federal district court for the Southern District of New York enjoined Telegram Group Inc. from proceeding with its long-planned token generation event, finding not only that the issuance of their tokens, Telegram Open Network, would violate the registration requirements of the Securities Act of 1933 but that the initial placement of SAFTs constituted an illegal unregistered offering of securities. On June 26, 2020, the court approved a settlement between the United States Securities and …
Blockchain / July 7, 2020
What Is an STO, Explained
What is an STO? STO stands for security token offering. Similar to an initial coin offering (ICO), an investor is issued with a crypto coin or token representing their investment. But unlike an ICO, a security token represents an investment contract into an underlying investment asset, such as stocks, bonds, funds and real estate investment trusts (REIT). A security can be defined as a “fungible, negotiable financial instrument that holds some type of monetary value,” i.e., an investment product that is backed by a real-world asset such as a company or property. A security token, therefore, represents the ownership information …
Blockchain / Feb. 21, 2019
SEC Crypto Czar: Platforms Listing IEOs May Face Regulatory Trouble
The United States Securities and Exchange Commission’s (SEC) Advisor for Digital Assets and Innovation Valerie Szczepanik said that platforms seeking to list initial exchange offering (IEO) tokens for a fee could find themselves in regulatory trouble. Szczepanik delivered her comments at the Consensus 2019 conference on May 13. Speaking on IEO, Szczepanik — also known as the commission’s “crypto czar” — argued that platforms seeking to list IEO tokens for a fee and attract buyers for an issuer are likely engaging in broker-dealer activity. Szczepanik said: “If they are not registered they will find themselves in trouble in the U.S., …
Blockchain / May 13, 2019
Confirmed: Basis CEO Says Project Will Shut Down due to Regulatory Concerns
The United States-based stablecoin project Basis has officially confirmed that it will close operations and refund investors in comments to Bloomberg today, Dec. 13. According to Basis’ CEO Nader Al-Naji, the decision to close the project was made due to regulatory concerns over a type of token in Basis’ — as well as other algorithmic stablecoins’ — system known as a “secondary token,” which helps keep the coin’s price stable. Following reports on the project’s closure yesterday, Dec. 12, Al-Naji now confirmed that there would be no way to “escape security classification” for the secondary token, calling the news a …
Adoption / Dec. 13, 2018