US Securities and Exchange Commissioner Hester Peirce has reiterated her criticisms of her own agency’s approach to cryptocurrencies in a recent appearance at ETH Denver.

Peirce expressed frustration over the SEC’s tendency to “regulate by enforcement” and criticized the slow approval process for spot Bitcoin exchange-traded funds (ETFs).

During a conversation with CNBC’s MacKenzie Sigalos, Peirce highlighted the SEC’s handling of the Grayscale case, which led to the approval of a Bitcoin exchange-traded product. 

“It’s remarkable to me that it took a court to tell us that we had to do that,” Peirce said.

“I started in 2018. That summer, we had our first Bitcoin exchange-traded product come before us as a commission. And I thought back then—which was quite a long time ago now—we should have said yes to it.”

Peirce refrained from commenting on pending applications for Ethereum spot ETFs, stating that they are currently under consideration at the SEC.

SEC Continues Regulation by Enforcement Against Crypto: Hester Peirce

One of the main barriers within the cryptocurrency industry is the SEC’s reliance on enforcement actions instead of establishing clear regulatory guidelines in advance. 

Peirce criticized the agency for its reactive approach and emphasized the importance of having clear rules that can be followed, rather than relying on enforcement actions after the fact.

“If you really want to sort the bad behavior from the good behavior, having rules that are clear to people who want to follow them is a much better approach than doing this, parachute in later with enforcement.”

Peirce called for collaboration between crypto enthusiasts and policymakers to develop ideas that can be implemented when SEC Chair Gary Gensler changes his stance on cryptocurrencies. 

She mentioned the concept of a token “safe harbor” that would provide basic disclosure requirements and allow projects time to achieve decentralization. 

This aligns with her previous proposal and a bill introduced by U.S. Representative Patrick McHenry in October 2021, which suggests a three-year safe harbor period for crypto startups to demonstrate network maturity and decentralization.

Peirce Acknowledges SEC’s Role in Prosecuting Fraud

During the conversation, Peirce also acknowledged the SEC’s role in prosecuting fraud. 

As reported, the SEC has revealed that its enforcement actions in fiscal year 2023 resulted in nearly $5 billion in fines and reimbursements to investors. 

According to the SEC, the total penalties obtained between October 2022 and September 2023 were the second-highest amount recorded. 

However, Peirce emphasized the need for a balanced conversation regarding regulation, rather than relying solely on enforcement actions.

Meanwhile, SEC Chair Gary Gensler has been a vocal critic of crypto as of late, warning about the crypto industry’s noncompliance.

Back in September, he acknowledged that while not all tokens can be prejudged, a significant portion of the crypto industry falls under securities laws but remains non-compliant.

“This crypto space that much of it, without prejudging any one token, much of it is under the securities laws, but unfortunately, much of it is also non-compliant,” he said.

 

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