SEC Commissioner Peirce Criticizes SEC's Inaction on Crypto

SEC Commissioner Hester M. Peirce urged the SEC to structure a regulatory framework for crypto rather than relying on enforcement actions to create one.

In remarks at the Regulatory Transparency Project Conference, a venture of The Federalist Society, Commissioner Peirce challenged this approach, stating that "enforcement actions short-cut the regulatory process" and do not provide a level of clarity for investors in crypto. She said that "a more productive path to crypto regulation" would allow those in the crypto space to consider if the laws affect them and provide the level of clarity that has been absent. She asserted that by collaborating with the crypto community, the SEC can properly structure these regulations. She expressed disappointment that recent legislative proposals would shift regulatory authority to the CFTC, saying that they were "likely rooted" in the fact that the "SEC has not used more proactively the authorities it already has to sensibly regulate crypto."

In particular, Ms. Peirce criticized the SEC's refusal to allow the listing of Exchange-Traded Products ("ETPs") based on the spot bitcoin market. She explained that spot crypto ETPs would allow investors (i) to gain exposure to bitcoin through securities, (ii) to incur lower fund-management fees and (iii) to buy and sell the same way they trade other exchange-listed products. She argued that crypto-specific products are subject to more obstacles than other products for approving pooled investment instruments and that the SEC's failure to act is troubling in light of the growth and liquidity of the bitcoin market. She noted that spot ETPs have taken off in other countries, such as Canada and Europe, where they have experienced no incidents and attracted a substantial number of investors.