Hester Peirce, the commissioner of the US Securities and Exchange Commission (SEC) believes the government should not limit new products in the crypto market. Pierce is one of the SEC’s few pro-crypto leaders. Peirce believes the SEC shouldn’t warrant overreaching government regulation simply to deploy new products into the crypto markets.
As she explains:
The Commission should not default to a demand that the crypto markets be subject to comprehensive government regulation as a precondition to allowing products linked to those markets to be traded in markets that we regulate.H. Peirce, Commissioner for the US Securities and Exchange Commission in a speech delivered at the Cato Institute FinTech Unbound Conference
SEC Should Evaluate Products Such as ETFs, not Bitcoin Markets Themselves
Peirce believes that if the crypto markets are the sole focus, there could be significant delay in bringing publicly tradable instruments associated with cryptos to the public.
The SEC commissioner was public about her dissent with her colleagues in denying the Winklevoss ETF over the summer. The SEC publicly admits their denial of the crypto ETF had nothing to do with their evaluation of the Bitcoin and cryptocurrency market. Regardless, news of the rejection created a slight dip in the cryptocurrency market prices.
Further, Peirce’s stated in her dissent with the SEC decision that the rejection of the ETF reflects the the SEC’s focus on Bitcoin markets, instead of the ETF itself.
The disapproval order discourages new institutional participants from entering this market. Worse, it suggests that approval for bitcoin ETPs will come only when bitcoin spot and derivatives markets have matured substantially, yet, at the same time, contributes to further delay in their maturation, as potential institutional investors may reasonably conclude that the Commission will continue to repress market forces for the foreseeable future. As long as these investors decline to enter the bitcoin market because there is no efficient vehicle that would reduce the costs of entry, the features of the bitcoin market that cause the Commission concern are likely to persist. (Source)Excerpt from Dissent of Commissioner Hester M. Peirce to Release No. 34-83723
Peirce continued that the disapproval “dampens innovation” and warns that entrepreneurs trying to release products who can be accessible to all types of investors may turn elsewhere.
The Commission signals an aversion to innovation that may convince entrepreneurs that they should take their ingenuity to other sectors of our economy, or to foreign markets, where their talents will be welcomed with more enthusiasm.Excerpt from Dissent of Commissioner Hester M. Peirce to Release No. 34-83723 (Source)
SEC Approval Can Help to Stabalize Crypto Markets
Peirce appears to be a supporter of crypto, having been dubbed CryptoMom after her formal dissent of the SEC’s disapproval of the Winklevoss ETF. And while Peirce believes the SEC and governement should be more open to crypto regulation, she also argues the crypto markets have a self-sustaining quality to them as well:
What authority do we have to require that assets underlying securities be regulated as if they were securities? Even if we had this authority, private markets can and do regulate themselves. The crypto community includes lots of people who are very willing to speak up, criticize one another, and bring to light technological, corporate governance, and other perceived weaknesses in cryptocurrencies. Although not formal regulation, this kind of market discipline can be valuable in identifying problems.Peirce: Remarks before the Cato Institute’s FinTech Unbound Conference (Source)
Because of the technological complexity of crypto, the exchange markets remain largely inaccessible to many investors. This is part of the reason we developed the Evolution IRA program. We wanted to make the ability to safely and securely purchase and obtain crypto in a retirement account a reality for more Americans. However, for some investors crypto may still seem out of reach.
If the SEC can provide the infrastructure for easily accessible products like the ETF, a larger number of investors may begin to adopt and incorporate cryptocurrency into their portfolios. The increased adoption could then cause the value of the crypto market to increase while stabilizing the price and potentially decreasing some of the extreme volatility currently in the market.
The SEC commissioner remains optimistic about technological innovation in the US, and hopes to keep innovators here instead of going overseas.
The technological revolution the financial industry is experiencing now is very exciting. New asset classes like cryptocurrencies and new ways for financial companies to communicate with investors are likely to make our world look very different ten years from now than it did ten years ago. As a regulator—and one who is not adept with new technology—humility is, as I have noted, important. I do not know which technologies will succeed and fail. It is not my job to assess the relative merits of different products and services. Humility is also important as we think about how our attitudes and processes need to change to make the U.S. a comfortable home for the next generation of innovators.Peirce: Remarks before the Cato Institute’s FinTech Unbound Conference (Source)
Ultimately, if we can foster more innovation in the crypto market here in the US, we can benefit from reasonable regulation. This reasonable regulation can create a feeling of more stability among investors, increasing the number of those whom will feel comfortable entering the crypto space.
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