"On the first day I take office, I will fire Gensler immediately" - this is the promise made by the US presidential candidate and former President Trump to the encryption community at the Bitcoin 2024 conference.
Gary Gensler is the current chairman of the U.S. Securities and Exchange Commission. He is a person who has experienced a huge change in reputation in the encryption community, from having high hopes to facing severe criticism. In the view of Coinbase founder Brian Armstrong, in just a few years, Gensler has transformed from the founder of the blockchain course at MIT to the number one "sniper" of the encryption community. All this is due to his political identity. cause trouble.
At a time when there is no clear answer to the topic of "who should regulate cryptocurrency?", the U.S. Securities and Exchange Commission (SEC) where Gensler works has almost become the most active regulatory body in the encryption industry.
Statistics provided by Cornerstone Research show that since the SEC first filed a cryptocurrency-related enforcement action in 2013, the agency has filed a total of 173 enforcement actions as of 2023. As of the end of 2023, the SEC has imposed fines totaling approximately $2.89 billion on digital asset market participants. In 2023, the SEC’s total number of crypto-related enforcement actions hit an all-time high, up a whopping 50% from 2022.
The SEC’s official website calls it a “fruitful” year.
Although the SEC frequently "raises guns" against leading companies in the encryption industry, as a "politically balanced" agency, there are also members who are friendly to encryption. Among the five SEC commissioners, including Gensler, Hester M. Peirce is one of them with a clear-cut stance, which has even earned her the title of “crypto mom” within the industry.
Hester M. Peirce holds a bachelor's degree in economics from Case Western Reserve University and a doctorate from Yale Law School. She was nominated by then-President Trump in 2017 and was officially sworn in as a commissioner of the SEC in January 2018.
In an interview with Foresight News, she admitted that her views on the crypto industry have gradually evolved since joining the SEC, but overall she remains frustrated by the lack of progress in U.S. crypto regulation.
On the one hand, a large number of entrepreneurs in the encryption industry need to set up business entities offshore or refuse to provide services to Americans, which she "does not want to see." On the other hand, the SEC currently faces challenges in regulating the encryption industry. Hester M. Peirce believes that at a time when the U.S. Congress has shown strong interest in setting up a legislative structure for the encryption industry, proposing constructive ideas and accelerating their implementation is what the SEC should do in addition to law enforcement.
The following is the content of the interview.
Foresight News: You are widely regarded as a very pro-cryptocurrency commissioner. You've even earned the nickname "Crypto Mom" for your pro-crypto stance. How have your views on cryptocurrency regulation evolved since you joined the SEC? What drives you to continue to speak out for the industry?
Hester M. Peirce: First, let me state that my views are my own as a commissioner and do not necessarily represent the views of the SEC or my fellow commissioners.
My thinking has definitely evolved since joining the SEC in January 2018. Initially, I didn’t think we needed specific regulatory changes for cryptocurrencies. But as I learned more about what was going on in the crypto industry and the nature of the entities involved (often small development teams), it became clear to me that we needed a clearer definition of the SEC’s role. We need to provide a path for projects to achieve commercial viability while meeting statutory objectives, which may require exemptions from some rules.
My frustration with our lack of progress also inspires me to continue advocating for better interactions with the crypto world. One direction I'd like to see the SEC go in the future is for it to exist not just as a "Securities and Enforcement Commission," but for crypto projects to feel like they can actually come and talk to us and register if necessary.
Foresight News: What exactly is the “progress” you’d like to see?
Hester M. Peirce: I hope people working with crypto and blockchain technology can focus on their projects. They should have enough understanding of the regulatory structure that they don't need to spend all their time thinking about it or designing (projects) around legal uncertainty. Good regulation enables innovators to focus on building under clear rules, rather than constantly trying to understand the rules they are following.
Foresight News: How do commissioners (within the U.S. SEC) balance different perspectives regarding cryptocurrency regulation? Do you often try to convince others how to resolve specific policy disagreements?
Hester M. Peirce: The SEC is uniquely structured as a politically balanced committee, which naturally leads to disagreements. However, this structure helps maintain policy continuity. We discuss and debate issues, many of which are not particularly controversial, after all we all want capital markets to work well. Sometimes we persuade each other to change our views.
While I am frustrated with our progress, I am also optimistic that we can make changes. We can decide tomorrow to stop letting “law enforcement” dominate cryptocurrency and instead address these difficult issues at the committee level and bring others into the conversation.
Foresight News: What are the main challenges the SEC faces in regulating cryptocurrencies? What are the current regulatory priorities in this industry? Looking ahead, what do you see as the most pressing challenges? In which specific industries do you think the Commission needs to adapt its approach?
Hester M. Peirce: We face several challenges:
We tend to think of the properties of crypto as entirely financial, but that’s not the case. For many applications, such as decentralized physical infrastructure, the primary attribute may not be financial. We need to be careful not to impose financial regulations where they are inappropriate.
The technology is difficult to understand and evolving rapidly. It takes some effort to sort through some of the hype and truly understand the underlying innovation, which can be challenging for a large market regulator like ours.
Limitations in terms of time and energy are also an issue. We have a lot of other things on our agenda, so finding the time to do a good job on crypto-related topics can also be challenging.
Finally, there is a challenge that may also be partly our own. We know there is some bad activity in the cryptocurrency industry, and if we had done a better job regulating it before, it would be easier to distinguish the good players from the bad players within the industry. (Inadequate upfront work, in particular, will also) impact how we allocate limited law enforcement resources.
Foresight News: In your recent speech, you emphasized the need for regulatory humility. Can you elaborate on how this concept specifically applies to the SEC’s regulatory approach to cryptocurrencies?
Hester M. Peirce: Regulatory humility is critical to everything we do. As I get older, I become more convinced of the depth and diversity of talent in the world. As a supervisor, I have limited knowledge, so why should I be isolated from people with different experiences and educational backgrounds?
Applying this idea to the crypto industry means we need to have an open dialogue about the right approach to regulation, allowing for diverse participation. We should not do this primarily through enforcement settlement rooms, where power and influence are imbalanced and many voices are excluded.
A humble approach will allow us to achieve better regulation in many industries, including crypto. This is something we all need to work towards. Remember that we only see a small part of the world and are always looking for other perspectives.
Foresight News: The approval of the Bitcoin ETF and Ethereum ETF is a significant development. From an SEC perspective, how do you see this impacting the broader cryptocurrency market and the Commission’s regulatory approach going forward?
Hester M. Peirce: These approvals are milestones, and it's great that people now have the opportunity to buy these (ETF) products if they think they're appropriate for their portfolios.
However, one should not over-interpret this. The court told us that our decision not to approve a Bitcoin ETF was arbitrary and capricious. When a court says this, we don’t have much choice but to apply what we have done with similar products in the past. The case is a backdrop that will certainly be used to evaluate the SEC’s regulatory direction for the broader crypto industry.
Foresight News: The debate over classifying cryptocurrencies as securities or commodities continues. How do you see this debate developing within the SEC in light of recent court rulings and regulatory actions?
Hester M. Peirce: I don’t think we have approached this issue with the legal rigor that is required. We need to strictly adhere to the law, but also think about what we want to achieve. One thing that drives much of SEC regulatory policy regarding cryptocurrency is that we are a disclosure regulator. We want people to get information about the things they buy, which is not a bad goal in this industry.
We need to have a conversation about our goals and then figure out the best way to achieve them. We need to ask questions like: What are similar assets? How should cryptoassets be treated compared to other similar assets? We need to have this legal conversation.
Foresight News: Many crypto project founders — some of whom are even U.S. citizens — choose to register their projects offshore or not serve U.S. clients due to regulatory concerns. How does the SEC view this trend, and what steps do you think we can take to make the United States more competitive in attracting crypto innovation?
Hester M. Peirce: Personally, I want America to be a place where people from all over the world come to build. We've always been a place where entrepreneurs and innovators love to gather and create new things together. I hope the same is true for cryptocurrency innovation.
There are now fewer concerns about moving overseas (of crypto projects and talent) because of skepticism about whether real innovation can occur in the cryptocurrency industry. But ultimately, our job is to do the best policing we can and then people make decisions based on their own criteria.
I hope we can tell people that the SEC is open to innovators from anywhere. We want people to come here and build things here, just like people are coming here from all over the world to invest in our capital markets because our markets are very good markets. I want the quality of our market to be the reason people decide to come here.
Foresight News: While mainland China has taken a strict stance on cryptocurrencies, Hong Kong has recently adopted a more open approach to crypto regulation. As an SEC member, how do you view the regulatory differences between the United States and major Asian markets such as Singapore and Hong Kong? What insights or lessons do you think U.S. regulators can gain from looking at these different regulatory approaches in Asia?
Hester M. Peirce: One thing we can do is learn from approaches adopted elsewhere. Japan, for example, has a relatively long history of regulating cryptocurrencies. Singapore believes they will indeed work hard to provide opportunities for people to try the technology.
I would like to see more openness in the US to traditional financial institutions as well as new entrants experimenting with this technology. Recently, I put forward a proposal for a "micro-innovation sandbox". Ideally, it would allow cross-border participation, experiments involving multiple jurisdictions. Even if there's something like this in the United States, it's somewhat borrowed from the openness to experimentation [in crypto innovation] in places like Singapore.
We see other jurisdictions dealing with some of the same issues we are dealing with, and we have a lot to learn from them.
Foresight News: In the United States, there is growing discussion about the so-called “election effect” on cryptocurrency regulation, with some candidates even proposing the creation of crypto reserves. How likely do you think there will be significant changes in cryptocurrency regulation based on the election results? If these changes do occur, how might they affect regulatory approaches in other jurisdictions around the world?
Hester M. Peirce: I am more concerned with coming up with good ideas so that they can be used when the institution is ready to adopt (these proposals). We could probably decide tomorrow to take a different approach to regulating cryptocurrencies. So we have to prepare good proposals. That’s why I proposed a “safe harbor” (proposal) (for tokens) a few years ago and more recently a “micro-innovation sandbox” proposal. I welcome the input of others on this – and other ideas about how we do our regulatory work well.
In the United States, Congress has shown significant interest in developing a legislative framework for cryptocurrency. This is already happening. We've seen a lot of activity in this area this year. So we shouldn’t wait, we should work now to put ideas into action and move forward as quickly as possible.
Foresight News: Cryptocurrency markets are heavily influenced by key figures on X, such as Elon Musk or Donald Trump. How does the SEC view this phenomenon from a regulatory perspective? Is there any consideration or discussion within the SEC to potentially address or regulate these market-moving statements on social media?
Hester M. Peirce: I don’t want to talk about any specific crypto assets or individuals, but I will say that in traditional securities markets, we have rules about encouraging others to buy or not buy securities.
I also have a common sense suggestion for anyone considering buying an asset: Do I understand it, or do I hire someone who understands it? Is this right for my portfolio? If a loss occurs, can I afford it? What is the risk-reward balance? Why is this person recommending this (asset) to me and what benefit do they get from it?
Regardless of the asset, people need to ask these questions (before making an investment decision). Some assets may or may not fall within our regulatory scope, so these are questions we sometimes answer and sometimes not. But regardless of jurisdiction, people should be cautious when deciding to buy or not to buy, and consider whether they can afford to lose.
I believe in individual freedom and the right of people to make decisions about their own assets. But with freedom comes responsibility. Make an educated decision, or if you'd rather let someone else manage your money, there are professionals who can help. There are databases out there where you can research these professionals and make sure you're working with someone you can trust.
Foresight News: Cryptocurrency exchanges in the United States, such as Coinbase, are currently prohibited from offering services such as futures contracts and leveraged trading. Do you foresee any changes to these restrictions in the foreseeable future? How does the SEC balance financial product innovation and investor protection in the cryptocurrency industry?
Hester M. Peirce: I want to answer that question because it's an interesting question.
Sometimes we think of innovation and investor protection as being at odds with each other, but a key component of investor protection is ensuring that people have access to the products and services they want, while ensuring they have the information they need to make good decisions.
I tend to say that we shouldn't hinder products and services, what we should really be doing is helping people get the information they need. The question of whether a particular entity can or cannot provide (these products and services) is very nuanced, and some of the products and services you mentioned may not be within the purview of the SEC. Many of these questions come back to whether these products and services are securities.
When it comes to futures products, in the United States we have an unusual (regulatory) structure. We have the Commodity Futures Trading Commission as the futures regulator. So some of the issues in (your question) are very nuanced and I don't want to respond to that without knowing the specific facts and circumstances in advance.
【Disclaimer】The market is risky, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: Wendy, Foresight News
