Hester Peirce: There’s a Jurisdiction Battle Over Crypto Regulation

It would be in the best interest of investors for a spot bitcoin exchange-traded fund to be approved, but it will take regulators some time to get on the same page, US Securities and Exchange Commission (SEC) Commissioner Hester Peirce said Thursday. 

“I think by withholding from investors exposure to spot products, we’re actually not helping them, we’re actually putting them in a worse position,” she said during the virtual Bloomberg Financial Innovation Summit. “Of course, we do these product approvals on a case by case basis, but I do think that it’s not the best for investors not to give them access to this product.” 

Regulation around digital assets has been slow, Peirce said, in part because there are several governing bodies competing for jurisdiction. Congress has a lot on its plate, and cryptocurrency regulation likely is not at the top of its priorities, she said. The SEC can do some on its own but The Commodity Futures Trading Commission (CFTC), which regulates derivatives markets in the US, also has some jurisdiction claims. 

Regardless of which group leads the charge on establishing boundaries around digital assets, Peirce said SEC Chairman Gary Gensler is going to continue to advocate for strict guidelines. 

“Gensler is a data person,” she said. “He’s thought a lot about data, and so I think that that can be compelling to him. But he also is a big believer, and he’s been very clear that he thinks that having a federal financial regulator of the crypto markets is something he’d like to see.” 

Peirce is less certain that an entirely new regulatory body is the correct answer. 

“We have such a fragmented regulatory system for financial products and services generally that I don’t know that adding another regulator would be my top preference,” she said. 

Peirce, who the cryptocurrency community has affectionately dubbed ‘crypto mom,’ has long advocated for greater clarity around digital asset policies. A lack of concrete rules has prevented innovation in the space, she said. 

In August, Peirce publicly criticized the $10 million fine her agency imposed on crypto exchange Poloniex, claiming that the SEC too often takes an “enforcement-first” approach without appropriate due diligence. Regulators need to take the time to establish reasonable guidelines rather than imposing oftentimes arbitrary punishments, she said. 

Peirce is one of five Commissioners. She was appointed by former President Trump in 2018 after failing to receive Senate approval when former President Obama first nominated her in 2016.