Commissioner Peirce Offers Congress Blueprint to Streamline Crypto Regulation
Commentary by Steven Lofchie and Andrew Lom
SEC Commissioner Hester M. Peirce outlined seven strategies for Congress to streamline crypto regulation.
In remarks at the Digital Chamber's 8th Annual DC Blockchain Summit, Commissioner Peirce, also the head of the SEC Crypto Task Force, described the complexities of the current regulatory landscape. She argued that multiple agencies, banking regulators, and state authorities assert jurisdiction over aspects of crypto regulation, which results in overlapping and potentially conflicting oversight.
Ms. Peirce recommended Congress focus on the following to prevent crypto regulatory dysfunction:
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Existing Regulators. Congress should work with existing regulators, rather than creating a new regulatory body.
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Clarify Domestic Scope. New legislation should focus on platforms that are "set up in the United States—or reaching into the United States—to serve U.S. customers."
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Preempt State Regulation. Federal oversight should take precedence in matters of interstate commerce to "alleviate overlap" with state regulators.
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Define Jurisdiction Clearly. Congress should assign distinct regulatory responsibilities for different types of crypto assets to "particular federal regulators."
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Enable Cross-Regulatory Trading. Congress should allow crypto assets issued under SEC frameworks to be traded on CFTC-regulated platforms, minimizing unnecessary transition costs and operational inefficiencies.
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Leveraging Experience. Congress should draw on the SEC's and CFTC's regulatory experience in traditional markets to develop flexible, "principles-based" regulations for crypto assets and trading platforms.
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Protect Peer-to-Peer Transactions. Congress should uphold individuals' rights to transact freely using decentralized technologies, ensuring both market competition and fundamental liberties are preserved.
Ms. Peirce also suggested that lessons from crypto regulation could inform broader reforms in traditional financial markets, where regulatory complexity has increased over decades. "A well-crafted regulatory edifice lies just on the other side of the forest," Ms. Peirce concluded. She urged stakeholders to collaborate in shaping a framework that balances innovation, investor protection and market integrity.
Commentary
Commissioner Peirce is thinking big. She wants not only to devise a tailored scheme for crypto regulation, but then to use the thinking on that new scheme to rethink how our existing securities regulations might be revised.
Commentary
For decades or even centuries, different financial products and non-financial products have been invented, upgraded, redesigned, used, and forgotten; some flourished and many failed. Through it all, different regulators at the federal and state levels tried their hand to protect consumers, regardless of what the thing was or what technology was used.
There is no reason an appropriate allocation of regulators and regulations cannot be worked out for the myriad forms of digital assets. Surely one size does not fit all. While it is good to be past the era of knee=jerk reactions that conclude every digital asset must be a security, there is still a real danger of too much overlap, too much reliance on existing and ill-fitting systems, too much analogizing to traditional market frameworks, and not enough room for healthy experimentation. The first step likely is to define jurisdiction clearly because nobody expects the SEC to regulate a tomato, even if someone should prevent the sale of rotten tomatoes.