SEC in ‘Enforcement-Only Mode’ for Crypto, Commissioner Peirce Says at ETHDenver

DENVER – U.S. Securities and Exchange (SEC) Commissioner Hester Peirce said the top U.S. investment watchdog is in an “enforcement-only mode” when it comes to crypto, underscoring the uphill battle the industry faces against a litigious SEC.

Speaking at ETHDenver Thursday, Peirce, the most crypto-friendly of the SEC’s five commissioners, bemoaned that a regulator needed to attend the annual gathering of crypto developers, investors and marketers focused on Ethereum, the number two blockchain behind bitcoin.

“What I reflect is the fact that you all are spending part of your brainpower,” wondering how to avoid getting sued, she said to the conference’s packed main stage. “If we had clearer rules you could focus on building.”

Since joining the SEC in 2018, Peirce, a lawyer, has openly advocated for crypto in the face of skepticism from many of her colleagues, including current Chair Gary Gensler. While prefacing her remarks with a “these views are my own” disclaimer, Peirce spoke openly about her frustration with the regulator’s willingness to seemingly pass judgment on crypto as an asset class.

“If we all want to bubble wrap ourselves it would be a much less interesting country,” she said.

The SEC has sued Coinbase, Ripple, Kraken and others for allegedly bringing illegal and unregulated investments to the U.S. public on the basis that crypto falls under many of the same rules that govern better-known investments, like those in the stock market. But those companies and others, including Peirce, say crypto should not qualify and needs clarity from the regulator and lawmakers.

Months ago, the SEC lost its fight with GBTC issuer Grayscale over the company's efforts to convert the bitcoin trust product into an exchange-traded fund with wide appeal. That loss forced the SEC’s hand and led to the regulator’s approval of a litany of bitcoin ETFs in January. “It's remarkable to me that it took a court to do that,” Peirce said.

Despite the SEC’s court-forward approach, Peirce said the regulator and outside observers need to continue developing regulatory frameworks for crypto, like the token safe harbor act (Peirce has twice proposed her own safe harbor proposal). She spoke of a time when, perhaps, SEC Chair Gensler (who has broadly alleged that most cryptocurrencies are violating securities laws) would wake up and change his tune to the industry.

“We need to have the ideas ready to go, on the shelf,” she said.

Read more: A Tale of 2 SEC Commissioners