SEC Commissioner Hester Peirce spoke at the CFC 2021 virtual blockchain conference on January 20, where she discussed the prospect of working with a new Biden-appointed chairman and expressed her hopes of providing a “safe haven” for the cryptocurrency space .
Peirce, affectionately known as “Crypto Mom” by cryptocurrency enthusiasts, spoke about the move at the SEC, when former chairman Jay Clayton resigned in December. Incoming President Joe Biden has since nominated Gary Gensler for the role.
Peirce said Gensler’s appointment was not yet set in stone, but the appointment of a new chairman offered an opportunity to approach things with new eyes:
“There have been some changes over the past year, so I think a leadership change is a good opportunity to examine these changes, including institutionalization. We have obviously seen that the price of Bitcoin has gone up quite a bit. We’ve seen a lot of activity in the DeFi space, and I think all of these things provide a good framework for a new chairman to broadly re-examine issues in the crypto space. “
The SEC commissioner dealt with the perennial “sword of Damocles” that has hung over the cryptocurrency space since it was founded: namely regulation. However, the aim of regulation should be to provide clarity, according to Peirce, and she hoped the new chairman would ensure that the US continues to be conducive to innovation.
“We really need to embrace innovation and figure out how to create a regulatory environment that is conducive to innovation. I think this means clarity in our area. I think this is something the new chairman will face from day one, ”said Peirce.
In February 2020, Peirce told an audience at the Blockress Blockchain conference in Illinois where she believed the SEC’s “Safe Harbor” regulations should be applied to cryptocurrency launches. As Peirce explained at CFC 2021, new projects are currently under pressure to prove their non-security status from day one.
“If you cannot prove that your token is functional from day one or that your network is decentralized, it may well be that it is treated as a securities offering under securities laws,” said the commissioner.
However, if Peirce’s proposal to apply Safe Harbor status to crypto launches finds approval with the SEC, he would give the projects an initial 3-year window of time during which regulatory liability would be gradually increased to encourage innovation. Peirce said:
“And in those three years you would be completing disclosure orders that would provide token buyers with some information about you, the development team, and the token economy. And it would also ensure that the anti-fraud provisions of our securities apply so you can’t lie about these things. “
Peirce said her proposal received “a lot of great feedback”, although not every observer necessarily agreed at the time. Some characterized Peirce as a single crypto-friendly figure in a world of blockchain skeptics.
With the arrival of a new SEC chairman just around the corner, however, Peirce has reason to be optimistic. She said:
“As many people in the field know, Gary Gensler actually has a lot of knowledge about crypto, having worked on many of these issues at MIT. He is aware of the safe haven and it is a conversation I will have with him if he is confirmed as chairman. “
Peirce was also asked about the recent announcement by the Financial Crimes Enforcement Network (FinCEN) that cryptocurrency holders with overseas accounts greater than $ 10,000 would soon have to report their holdings to the U.S. Treasury Department. Questioning the practicality and morality of the FinCEN proposal, she added:
“We have to be really careful about monitoring the transactions of anyone who is not suspected of wrongdoing. Monitoring your wholesale financial transactions is really worrying as financial transactions are ultimately who you are, what you do, what you buy, what you are interested in. “
The existence of decentralized funding would also hinder such attempts at financial monitoring by FinCEN. As Peirce rightly points out, identifying a legally culpable counterparty can be difficult when that counterparty may not even be human.
“You may not have a physical address for the person or a name for the person – because it may be an algorithm. How do you identify a person or a physical address when you have a smart contract? “She asked rhetorically.