WASHINGTON — The U.S. has dropped the ball on crypto regulation, according to Securities and Exchange Commissioner Hester Peirce, and she says the knock-on effects of that failure keep her up at night.
“There’s a lot of fraud in this space, because it’s the hot area of the moment,” Peirce told CNBC on the sidelines of the DC Blockchain Summit this week. “The other piece that does concern me is the way that we’ve sort of dropped the regulatory ball.”
She continued, “We’re not allowing innovation to develop and experimentation to happen in a healthy way, and there are long-term consequences of that failure.”
The comments come as the crypto market meltdown continues.
A broad sell-off in digital assets has erased more than half a trillion dollars from the entire market in the space of a few weeks thanks, in part, to turmoil in a subset of cryptocurrencies dubbed stablecoins.
The name comes from the fact that these digital currencies are specifically designed to be stable, with values pegged to the price of real-world assets such as commodities like gold, or fiat currencies like the U.S. dollar. The price moves of stablecoins are seldom worth mentioning because they’re not supposed to fluctuate much. But the collapse of UST — one of the more popular U.S. dollar-priced stablecoins — had a contagion effect across the entire cryptocurrency ecosystem. Those shockwaves have also lit a fire under lawmakers and regulators.
“We can go after fraud and we can play a more positive role on the innovation side, but we have to get to it, we’ve got to get working,” said Peirce.
“I haven’t seen us willing to do that work so far.”
The SEC’s crypto remit
The SEC’s job description when it comes to regulating cryptocurrencies is amorphous.
Wall Street’s top regulator oversees securities, and until recently it was difficult getting Chair Gary Gensler to pin down which of the more than 19,500 cryptos fall under his jurisdiction, versus the commodity tokens which would be better left to law enforcers at the Commodity Futures Trading Commission.
But in recent testimony to the House Appropriations Committee, Gensler offered some clarity, saying that the SEC has jurisdiction “over probably a vast number” of the cryptocurrencies in circulation. The SEC chief also conceded that bitcoin was “maybe” not under their purview — which, for him, were strong words on the subject.
Gensler’s recent take on bitcoin’s regulatory jurisdiction runs in parallel to ex-SEC Chief Jay Clayton, who previously said that cryptocurrencies are “replacements for sovereign currencies,” and if you “replace the dollar, the euro, the yen with bitcoin…that type of currency is not a security.”
The SEC has spent the last few months beefing up its roster and broadening its remit with respect to digital asset regulation.
In April, Gensler said Wall Street’s top regulator plans to register and regulate crypto platforms, and earlier this month, the agency announced it would almost double the staff responsible for…
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