SEC Commissioner Hester Peirce has pushed back on the Digital Chamber of Commerce’s “national action plan” for blockchain.
Having worked over a decade in government before becoming a commissioner to the U.S. Securities and Exchange Commission (SEC), Hester Peirce is a regulator well-versed in matters of both rulemaking and securities law.
Regulators like the Securities and Exchange Commission shouldn’t be acting as gatekeepers to new technologies like bitcoin, according to Commissioner Hester Peirce.
Peirce’s remarks, made during an interview with CoinDesk, follow the agency’s decision to confirm the 2017 rejection of a bitcoin-tied exchange-traded fund backed by Cameron and Tyler Winklevoss, which reinforced the argument made in a publicly-issued dissent published alongside last week’s announcement.
According to Peirce – who was sworn into office this past January and previously served as a staffer in the U.S Senate – the decision actually does a disservice to investors who are operating in the market.
“From my perspective, we need to be mindful of what our role is, and it’s not to be the ones who decide which innovations and which technologies get through and which ones’ don’t,” Peirce told CoinDesk.
“I think that’s a very dangerous position to put ourselves in, and I think it really does harm investors because it denies them opportunity.”
Perhaps unintentionally, Peirce’s dissent made her a kind of hero in the eyes of the crypto community, netting comparisons to the effect comments made by Commodity Futures Trading Commission (CFTC) chief J. Christopher Giancarlo had on his own social media following earlier this year.
In the days following what were perceived as his positive remarks about the technology, Giancarlo was quickly dubbed “Crypto Dad,” a nickname that’s now been extended to Peirce, who some have sought to label the “Crypto Mom” of seemingly supportive U.S. regulators.
But according to Peirce, her statement on Friday wasn’t intended as a remark in support of bitcoin; rather it’s in defense of new technologies and the people who invest time and resources in developing them.
“I’m not taking a view whether bitcoin is going to succeed or fail. I’m excited by the fact that people are thinking of new ways to do things,” Peirce told CoinDesk. “Bitcoin is one of those things, blockchain is one of those things, other cryptocurrencies – but again I’m not weighing on any particular innovation or any particular asset.”
According to Peirce, the Winklevoss proposal was worthy of approval.
In both interview and in her Friday statement, Peirce argued that Bats BZX Exchange, the exchange that filed the proposed rule change and pushed for a review following the rejection by agency staff in March 2017, had satisfied the requirements as dictated by the Securities Exchange Act.
She argued that it was wrong for the agency to focus on manipulation in the spot market for bitcoin and that the risks in question were taken into consideration when BZX made its pitch to the SEC.
“I think the exchange, in making a decision to list this particular product, had looked into whether it thought investors were interested in it, and if investors are interested in it, I don’t see why we should stop them from having access to it.”
Indeed, in her Friday statement, Peirce contended that “approval of this order would demonstrate our commitment to acting within the scope of our limited role in regulating the securities markets.”
“If someone is trying to raise money for a legitimate project, as long as the person explains what he’s trying to do and what he’s going to do with the money that reveals everything material that investors need to know – I don’t think we should stand in the way,” she later told CoinDesk.
Nothing to follow?
Support or not, Peirce’s remarks earned her a big boost in Twitter followers, which as of the time of writing stands at roughly 15,800. Data from analytics site SocialBlade shows that at the start of the month, her follower count was at 1,275, representing a 1,139 percent increase.
And while she clarified that she’s not an advocate for bitcoin or cryptocurrencies, she said she finds the work around the technology “really exciting.”
“It’s not that I’m supporting any one asset, it’s just that I’m supporting the ingenuity and the creativity and the curiosity that’s motivating people to invest their time and money in these new technologies,” she said. “I think that’s exciting. But again, I can’t weigh in on any particular asset, including bitcoin.”
But according to Peirce, the crypto-faithful who are following her shouldn’t expect too many fireworks.
“It’s that my guess is that most of those followers will find most of my tweets very boring. Most of them are about very dull regulatory things.”
Hester Peirce image via YouTube/Elizabeth Warren
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Following the SEC’s decision to reject the application for approval of the Winklevoss Bitcoin Trust for listing and trading shares on Bats BZX Exchange, Inc. (BZX), the SEC Commissioner Hester Peirce issued an official Dissent in which she states her opinion regarding what she considers an incorrect decision:
“I respectfully dissent from the Commission’s order disapproving a proposed rule change, as amended, to list and trade shares of the Winklevoss Bitcoin Trust on Bats BZX Exchange, Inc. (“BZX”).”
Ms. Peirce’s voice reflected the sentiment of several members within the crypto community who consider that government controls pose a barrier to the potential benefits that cryptos and blockchain technologies could bring to the world:
“I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.”
This would be the second time the Winklevoss twins fail in their attempt to obtain approval from government agencies. The first time was in 2017.
If approved, it would be the first cryptocurrency ETF and would have allowed trading mutual funds and institutional investments with cryptocurrencies.
The SEC released a filing on its decision, stating that the arguments put forward by BZX to justify the safety of the funds are not sufficient to eliminate fears of price manipulation.
SEC Clarifies: They Are Not Against Cryptos
SEC was emphatic in mentioning that the decision focuses on the BZX argument and that they do not deny the value that Bitcoin or DLTs can have as innovations in the business world:
“Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because, as discussed in detail below, BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.”
The SEC mentioned that it is very possible that over time conditions will be created for crypto ETFs to meet the requirements of state agencies thus allowing for a healthy crypto-market to exist within U.S. territory:
“The Commission notes that regulated bitcoinrelated markets are in the early stages of their development. Over time, regulated bitcoin-related markets may continue to grow and develop. For example, existing or newly created bitcoin futures markets may achieve significant size, and an ETP listing exchange may be able to demonstrate in a proposed rule change that it will be able to address the risk of fraud and manipulation by sharing surveillance information with a regulated market of significant size related to bitcoin … Should these circumstances develop, or conditions otherwise change in a manner that affects the Exchange Act analysis, the Commission would then have the opportunity to consider whether a bitcoin ETP would be consistent with the requirements of the Exchange Act.”
For SEC Com. Hester Peirce Such Allegations Are Not Enough
Ms. Peirce deems this argument to be contradictory as decisions such as the one taken simply hamper the changes that SEC itself consider would be positive should they occur.
Ms. Peirce’s letter made her popular in the community. In several Reddit Forums as well as Ms. Peirce’s Twitter account there are statements of support for her position as the voice of the crypto community in the SEC.
Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets. I dissent: https://t.co/gH5zXaKtmj
— Hester Peirce (@HesterPeirce) July 26, 2018