US Securities and Exchange Commissioner (SEC) Hester Peirce has recently highlighted the necessity for a transformation in the regulatory stance towards cryptocurrency, indicating a move away from the vigorous enforcement tactics of prior years.
In a recent interview on “Bloomberg Crypto,” Peirce elaborated on the SEC’s current analysis of its enforcement actions against crypto enterprises, underscoring the unusual employment of enforcement actions to influence regulatory policy.
Hester Peirce of the SEC Supports Policy Reform
“In recent years, enforcement actions have been utilized to establish regulatory policy; this is quite atypical,” Peirce remarked. “We’re aiming to return to a direction where we effectively use our alternative tools to formulate policy.”
The SEC’s latest motion to suspend legal proceedings against Binance, the largest cryptocurrency exchange, further exemplifies this change. The commission had previously filed a lawsuit against Binance and its co-founder, Changpeng “CZ” Zhao, in 2023, claiming that the platform mishandled investor funds and breached securities regulations.
Currently, the SEC is pursuing a 60-day pause in the lawsuit, referencing the ongoing creation of a regulatory structure for digital assets. Peirce avoided commenting on the potential results of the case, stressing the importance of evaluating each situation individually.
Peirce is now leading a crypto-centered task force within the SEC, focusing on developing a “complete and clear” regulatory framework. Among her goals are to determine which digital assets are considered securities and to pinpoint areas that lie beyond the SEC’s authority.
Her earlier initiatives have received acclaim from the digital asset community, notably for her endorsement of Bitcoin exchange-traded funds (ETFs) and her dissenting views on various SEC enforcement actions, which earned her the title “Crypto Mom.”
Legislative Inaction Leaves Crypto Classification Unresolved
Historically, the SEC’s robust approach to crypto regulation has been aggravated by Congress’s failure to enact legislation that distinctly categorizes cryptocurrencies as either securities or commodities.
This ambiguity has resulted in confusion and legal disputes, including a notable court decision that dismissed the SEC’s classification of XRP as a purported security, differing from the commodity classification given to Bitcoin.
Assistance may be forthcoming, as bipartisan legislation like the FIT21 bill strives to clarify the respective authorities of the SEC and the Commodity Futures Trading Commission (CFTC) regarding digital assets. Additionally, another proposed piece of legislation seeks to create a specific designation for stablecoins.
Peirce had earlier acknowledged the “legal ambiguity and commercial impracticality” that has characterized the SEC’s approach since it first applied the Howey test to cryptocurrencies in 2017.
This situation has led to sluggish litigation processes and hampered regulatory development, leaving numerous crypto initiatives in uncertainty. Looking ahead, Peirce highlighted the significance of concentrating on fraud and misconduct while also anticipating an increase in requests for regulatory relief and no-action letters.
She emphasized the urgency of meticulous practices during this transitional phase to ensure regulatory clarity is attained for the evolving market of digital assets.
Featured image from DALL-E, chart from TradingView.com
