U.S. Securities and Exchange Commissioner Hester Peirce is advocating for a change in the regulatory approach to cryptocurrencies, pointing towards a move away from the stringent enforcement methods that have been prevalent in previous years.
In a discussion on "Bloomberg Crypto," Peirce shared insights into the SEC’s current reassessment of its actions against crypto companies. She highlighted how unusual it has been to rely heavily on enforcement cases to dictate regulatory policy.
SEC’s Hester Peirce Calls for Policy Changes
“For several years now, enforcement cases have been leveraged as a tool for shaping regulatory policy, which is quite unorthodox,” Peirce explained. “We are making efforts to redirect towards utilizing other means to establish policy.”
The SEC’s recent actions toward Binance, the largest cryptocurrency exchange globally, further underscore this evolving strategy. The commission had initiated legal proceedings against Binance and its co-founder, Changpeng “CZ” Zhao, back in 2023, accusing them of mismanaging customer funds and breaching securities laws.
Currently, the SEC is requesting a 60-day pause in their lawsuit against Binance, as they’re in the process of crafting a regulatory framework for digital assets. Peirce opted not to predict the lawsuit’s results, stressing instead the importance of assessing each case individually.
Leading the charge for this change, Peirce heads a special crypto-focused group within the SEC, tasked with formulating a “thorough and clear” regulatory model. Her goals include identifying which digital assets are considered securities and clarifying what areas fall outside the SEC’s regulatory scope.
Peirce’s earlier initiatives have garnered admiration from the digital asset sector, notably for her advocacy for Bitcoin exchange-traded funds (ETFs) and her frequently dissenting opinions on various SEC enforcement decisions. It’s little wonder she’s earned the nickname “Crypto Mom.”
Lacking Congressional Action Keeps Crypto Uncertainty Alive
Historically, the SEC’s tough stance on regulating cryptocurrencies has been worsened by Congress’s failure to pass legislation that distinctly classifies cryptocurrencies as either securities or commodities.
This absence of clear guidelines has led to widespread confusion and legal obstacles, such as a critical court ruling that contested the SEC’s attempt to label XRP as a security, declaring it more akin to a commodity like Bitcoin.
However, there is potential progress on the horizon, with bipartisan initiatives like the FIT21 bill, which seeks to clarify the jurisdictions of the SEC and the Commodity Futures Trading Commission (CFTC) over digital assets. In addition, another proposed legislation is aiming to introduce a special status for stablecoins.
Previously, Peirce has acknowledged the “legal imprecision and commercial impracticality” marking the SEC’s stance since it started using the Howey test on cryptocurrencies back in 2017.
This regulatory uncertainty has not only stalled litigation processes but also hindered the development of clear policy frameworks, leaving countless crypto projects in a state of uncertainty. Looking ahead, Peirce emphasized the importance of targeting fraud and misconduct and predicted an increase in applications for regulatory waivers and no-action letters.
She highlighted the crucial need for meticulous practices during this transitional phase to achieve regulatory clarity as the digital assets landscape continues to evolve.
The visual chart presented displays the overall crypto market cap valuation at $3.08 trillion, showcasing trends across the digital assets sector.
Image source from DALL-E, chart provided by TradingView.com.
