Hester Peirce is Commissioner of U.S. Securities and Exchange Commission (SEC) and affectionately known as “CryptoMom” by the community. She is urging regulators to begin approving cryptocurrency products. Peirce recently made a speech at the Cato Fintech Conference in San Francisco, which focused on one important topics: the regulation of cryptocurrencies such as bitcoin and risk-averse regulators, especially the SEC, when it comes to cryptocurrency issues.
Peirce mentioned the word Bitcoin dozens of times in her speech. We have selected the most important and interesting statements of her speech below.
A few weeks ago, Peirce published a public dissent regarding the SEC’s decision to reject the bitcoin ETF application submitted by the Winklevoss twins. This response earned her the title CryptoMom by the cryptocurrency community. Amused by this, Peirce now refers to it, stating:
“In response to my dissent, I was informally dubbed CryptoMom. I always have wanted to be a mother, so acquiring this new title was quite an honor. Admittedly, this is not the form of motherhood I envisioned, but one of the wonderful aspects of motherhood is that children are quite different than their mothers anticipated they would be.”
Commissioner Peirce emphasized that there is a clear interest in bitcoin and cryptocurrency products. However, the enthusiasm for cryptocurrencies is currently not shared with the Commission:
“It is clear that there is strong interest among some investors for this type of product, and innovators in the industry have made several attempts to respond to this interest. So far, however, the SEC has not shared these investors’ enthusiasm. To date, the SEC has stopped all such retail products from getting to market.”
Peirce continued the CryptoMom theme and compared the current regulatory approach of the U.S. SEC with “helicopter parents” who want to overregulate the market:
“To shift my metaphor a bit, the SEC helicopters in with good intentions, but often without sufficient concern for the way its regulatory blades roil the markets, frustrate innovation, and potentially expose investors to greater risks”
Regulators need to hop out of their helicopters and onto the free range: https://t.co/LeKHY1jjmn
— Hester Peirce (@HesterPeirce) September 17, 2018
She pointed out that the financial markets and risk go hand in hand and it’s up to investors to determine their own risk appetite. The SEC must strike a balance between complicit inaction and innovation destruction:
“A key purpose of financial markets is to permit investors to take risks, commensurate with their own risk appetites and circumstances, to earn returns on their investments. They commit their capital to projects with uncertain outcomes in the hope that there will be a return on their capital investment. The SEC, as regulator of the capital markets, therefore should appreciate the connection between risk and return and resist the urge to coddle the American investor.”
Meanwhile, what prompted Peirce to dissent from her peers was the disapproval of the Winklevoss bitcoin ETF over the summer. According to Peirce, the SEC should not force the crypto industry into “comprehensive government regulation” for the sake of delivering products to the market. She explained:
“The Commission should not default to a demand that the crypto markets be subject to comprehensive government regulation as a precondition to allowing products linked to those markets to be traded in markets that we regulate”
Peirce emphasized that the rejection of the Winklevoss bitcoin ETF was unjustified and that the product met the legal requirement. She fears that the Commission’s approach undermines investor protection by precluding a stronger institutionalization of the bitcoin market. Greater involvement of institutions would, in their opinion, even mitigate many of the Commission’s concerns about the bitcoin market.
Peirce also has a problem with the SEC’s decision because it focuses on the characteristics of the bitcoin spot market and “not on the exchange-traded product shares to be listed on the exchange.” She closed her address with a very positive statement on cryptocurrencies:
“The technological revolution the financial industry is experiencing now is very exciting. New asset classes like cryptocurrencies and new ways for financial companies to communicate with investors are likely to make our world look very different ten years from now than it did ten years ago.”
The SEC could make a decision on the VanEck/SolidX bitcoin ETF application by the end of this month.