“Even though there are unknowns, there are potential benefits,” is what SEC Commissioner Hester Peirce would like foreign regulators to keep in mind regarding cryptocurrency regulation. Her comment came in response to a question from Tom Quadmann about working with foreign regulators during the Center for Capital Markets Competitiveness’s virtual conference on digital assets. Quadmann, an executive vice president at the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, had asked the commissioner what she thought about international leaders like ECB President Christine Lagarde, who last week called for global cryptocurrency regulation.
Peirce had been talking about the different approaches she saw regulators taking with regard to cross-border issues. Substituted compliance – compliance with a comparable foreign jurisdiction’s regulations as a substitute for local regulation – and joint research into cryptocurrencies by regulators are two familiar approaches.
These remarks came at the end of a 2020 interview in which the commissioner shared her upbeat view not only of cryptocurrencies’ potential but also of the possibility for the U.S. to develop beneficial regulation.
Asked about what she thought the cryptocurrency industry most wanted from regulation, she answered, “Clarity.” She noted that the SEC has developed guidance with its report on the 2016 failure of the Decentralized Autonomous Organization as well as its subsequent guidance on when ICOs constitute a security.
Admitting that the SEC doesn’t always move as fast as the industry might like, Peirce talked about the recent SEC statement on custody of cryptocurrencies and digital assets by special purpose broker dealers, which has a specified five-year shelf life. She said the commission hopes to get good feedback on what the industry thinks it needs. She pointed out that the new statement is relevant only for custody of digital assets that are securities (no bitcoin) and exclusively for broker dealers in these digital assets.
Peirce also said she is working on “Version 2.0” of the safe harbor proposal she published last year. She hopes it will become a full SEC effort.
Peirce also seemed energized by the prospect of Gary Gensler potentially chairing the commission. She said that the knowledge of cryptocurrencies that he gained outside of government will be enormously valuable to the SEC’s efforts to regulate them. She said that Gensler has a feeling for the dynamism of the industry and that he values the force of innovation in the U.S. economy.
The importance of innovation to economic growth is a leitmotif throughout Peirce’s work in cryptocurrencies. She thinks the U.S. has been the leader in innovation because it developed its own talent and attracted the best and brightest from around the world. She is concerned, with regard to cryptocurrencies, that not only are entrepreneurs developing projects outside of the U.S., they do not even want their networks distributed into the U.S.
Asked how concerned she was about the seeming regulatory difficulties innovators are having with U.S. governments, she said it is not too late to get things right.