"Crypto Mom" Hester Peirce Interview: Possible Next SEC Chair?

Author: Zack Guzman

Compiled by: Wu Says Blockchain

U.S. Securities and Exchange Commission Commissioner Hester Peirce shared her views on cryptocurrency regulation, the Bitcoin ETF approval process, market futures, and future regulatory directions in an interview with Coinage's Zack Guzman. She also discussed the impact of SAB -121 and Congress's efforts to define securities versus commodities. Peirce emphasized the importance of industry self-regulation and the role of government, expressing optimism about future changes in regulatory culture.

What is the reality behind the Ethereum ETF approval without a committee vote?

Peirce: It is not unusual for there to be no committee vote. Many of these ETP approvals are done at the staff level, which means we delegate authority to the staff to approve them without a formal committee vote. But I don’t think it’s strange because we have Bitcoin exchange-traded products. The courts have told us we must essentially move forward, and that’s what’s happening. Then applying the same logic, we really don’t have much choice but to approve these ETPs.

What are the differences between Bitcoin ETFs and Ethereum ETFs?

Peirce: I think Bitcoin ETFs are indeed very unusual because after years of buildup and so many different people trying to get approvals, they are finally going to launch, and everyone knows they will launch at the same time, there’s so much anticipation around it. While there is also anticipation around ETH ETFs, what we see is a more iterative process where they are approved in trading and market aspects, and then still need to go through corporate finance processes, which is what is happening now. So I think the atmosphere around ETH ETFs is much calmer. I think that’s the main difference. In fact, we shouldn’t be trying to create drama when such products launch; they should launch for trading, and then we see if people want to buy them, that should be how it operates.

Staking was removed from the application early on; why, and is there any possibility of change?

Peirce: I don’t comment on what happened between the staff and the issuers regarding the removal of staking from the application. However, I think that certain features of products, like staking or other functionalities, can always be reconsidered.

Does the application for a Solana ETF need the futures market to be approved?

Peirce: I hesitate to comment on these applications because they are before us. I cannot comment on them. What I can say is that we have to look at the facts and circumstances. What people need to do is to draw on previous ETP precedents, not just crypto ETPs, but other types of ETPs, and make a case for why they can be approved under existing laws and rules. So we have to look at it on a case-by-case basis.

I think people need to see if there are other types of markets or products that do not have a futures market as a basis, and then they can make a case based on that.

Should SAB -121 be repealed, and what is its impact on cryptocurrency custody?

Peirce: I think the process by which SAB 121 was issued was poor. To me, it actually looks like a rule-making process that could have been done through public comment, perhaps considered by the FASB instead of us. But in any case, we should have had a public comment period, which we did not. Attempts to overturn it have not been successful. But before trying to overturn it, the scope of SAB 121 has expanded. Initially, it was primarily aimed at public companies, and then it began to apply to broker-dealers. It has a lot of verbal guidance about what broker-dealers can and cannot do. Now we hear that there are other kinds of adjustments or changes happening in a very opaque manner. I don’t understand what benefit this brings to people. We should follow the process. SAB 121 has disappointed me greatly, and I think we could do better and should do better.

One reason I have opposed SAB 121 is that it takes a stance that we do not want experienced participants to custody cryptocurrency, which to me is a very strange and detrimental position for investor protection. So I welcome more people entering and participating in the development of custody. But this should be done in an orderly manner. I think bringing in participants with experience from other fields into crypto is a positive development. Unfortunately, whether at the SEC or elsewhere in the government, the government often tries to drive out those interested in participating but who are not welcome. So this is indeed a potentially positive development. I hope to see more participants enter the custody and crypto space.

Does FIT -21 assert that Congress can delineate the boundaries of cryptocurrency, and are you proud or concerned about the current regulatory direction?

Peirce: I think it’s good that Congress is taking the time to think through these very difficult questions (defining what cryptocurrencies are allowed and not allowed in the U.S.), and these are questions where we could have taken a more proactive stance in the regulatory space, and Congress is trying to provide some guidance. I think this is a positive step for the U.S., having a real dialogue around these issues and trying to find the right solutions.

But I think in terms of regulation, we are still in a not-so-good position because we are still pushing policy through enforcement, which is not how policy should be driven. It should be about thinking through a regulatory framework and then starting from there, and then using enforcement to deal with fraud issues.

Another area I have been working to push is around global stablecoins in the context of cross-border payments and tokenization on the blockchain. I think the U.S. may not be at the forefront of this path, seeing how other countries are trying to create an environment for people to conduct these experiments, which is a great lesson for us. I still believe we can achieve this through some rules or sandbox experimental frameworks. Because other parts of the world will do this. I don’t want us to fall behind. I think we have a strong capacity in the U.S. to try these experiments, so I hope we can do that at some point as well.

Has there been a change in the internal culture of the SEC? Are you optimistic about the future regulatory direction?

Peirce: Cultural change requires some positive steps, working with people and providing guidance. I am optimistic about future changes in regulatory culture because I see people looking for positive ways to interact with the industry. Ensuring the vitality of the industry is very important for us, and it is one of my priorities.

If you were to become the SEC Chair, what would be your top priority?

Peirce: Ensuring the vitality of the industry, allowing investors to make their own decisions, and ensuring that we do not set unnecessary barriers in rule-making.