Lack Of Regulation May Allow More Freedom For Crypto Industry, Says US SEC’s “Crypto Mom”

News, Regulation | February 11, 2019 By:

Hester Pierce, one of the five commissioners at the US Securities and Exchange Commission (SEC), said that delay in drawing clear regulations may actually allow more freedom for the crypto industry to come into its own.

Peirce is widely known as the “Crypto Mom” for her supportive statements about cryptocurrencies. Last year, Peirce dissented from the decision of the SEC to reject the bitcoin exchange-traded fund (ETF) filed by the Winklevoss twins.

In a speech on the issues of state regulation at the University of Missouri School of Law last week, Pierce said that delays in establishing crypto regulation will provide the crypto industry with more freedom to grow and develop independently.

“Ambiguity is not all bad, of course. We might be able to draw clearer lines once we see more blockchain projects mature,” Pierce said.

She added that if the SEC commissioners act appropriately, they can enable innovation on this new frontier to proceed without compromising the objectives of securities laws — protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets.

“Enforcement actions are not my preferred method for setting expectations for people trying to figure out how to raise money,” she said. “For this reason, it is important for the Commission, in conjunction with Congress and its fellow regulators, to offer something more concrete and carefully considered.

Pierce also said that she is concerned that SEC’s approach with respect to exchange-traded products based on bitcoin or other cryptocurrencies borders on merit-based regulation, which means that they are substituting their own judgment for that of potential investors in these products.

“We rightfully fault investors for jumping blindly at anything labeled crypto, but at times we seem to be equally impulsive in running away from anything labeled crypto,” she said. “We owe it to investors to be careful, but we also owe it to them not to define their investment universe with our preferences.”

Pierce concluded by saying that the regulator and the people on whose behalf it regulates must think carefully about whether and how regulation should be employed. However, that careful thinking, she said, may mean frustration for the innovators hoping for quick answers about what the relevant regulations are.

“I am asking for help on getting the regulations right so that innovators and entrepreneurs can spend their time and attention on making better products, providing better services, and revolutionizing the way we interact with one another.” she said.