Commissioner Peirce says that the Securities and Exchange Commission has “dropped the ball” on crypto regulation, and that there can be long-term consequences of this.
Hester Peirce was interviewed during the DC Blockchain Summit this week, and when asked if crypto could be regulated by existing banking frameworks, as proposed by Gary Gensler, chairman of the SEC, Peirce replied that in her view some areas could come under existing regs, but that there were other areas where “exemptions” and “adjustments” were needed.
The commissioner was questioned as to the possibility of much stricter regulations coming into force given the crash and depegging of the so-called Terra UST stablecoin, through which many investors had lost a lot of money. She responded by saying:
“We do have to take a balanced view right? I think it is likely that we’re going to have regulation happen faster because of the events of recent weeks, but stablecoin legislation was already on the docket, so it’s possible that it will move forward more quickly.”
However, the commissioner had the strong conviction that it was very important to allow innovators to “experiment with different models”, but that this should be done “within regulatory guardrails”.
She believes that congress needs to clarify the roles that the SEC and the CFTC are to have as regards crypto. She thought that maybe the SEC could be assigned to retail exchanges for example, but said that it was up to congress to make these decisions.
She said that there was a lot of work to be done within the SEC authority given that traditional financial institutions are looking to dip their toes in the crypto sector, and that they would definitely need “guidance” and “clarity” from the SEC.
Peirce stated that as well as responsible innovation, the sector needed responsible regulation.
“As regulators, we have to be willing to engage with the innovators and figure out “here are our regulatory objectives that we are trying to achieve. How can we achieve those and still allow you to try out this new product or service and see whether the market likes it?”
She thinks that this will take a lot of work from the SEC but had not seen that the agency was willing to do this work as yet.
Finally, when asked if the US needed a central bank digital currency (CBDC), she replied that in her view there were private stablecoins out there that could play this role, and the advantage of this was that they allow for competition.
“There are arguments that a central bank digital currency could operate alongside, but again, right now we’ve got a lot of innovation in the private stablecoin side and a lot of those are US dollar-referencing stablecoins, so they could potentially be that alternative.”
“It is important that whatever we do, that we protect people’s privacy and their ability not to be censored in their use of that currency, so that’s the difficult question.”
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