Asia Blockchain Summit 2020｜Commissioner of SEC Talks About the Latest Policy on Crypto
The 3rd annual Asia Blockchain Summit was held on July 15-19, 2020. Professionals from leading industry startups, investment firms, financial services giants, global brands, academic institutions, international media, and policy groups gathered virtually to discuss the evolving real-world applications of blockchain technology.
Hester M. Peirce, Commissioner of U.S. Securities and Exchange Commission (SEC) was invited to dive into those views on blockchain and crypto technology. She was appointed by President Donald J. Trump to the U.S. Securities and Exchange Commission and was sworn in on January 11, 2018.
Following is the full text of the conversation.
Q1. I understand that approval is still pending. But what are you hoping to accomplish in a second term?
As you see, getting nominated is one step. But the Senate now has a chance to weigh in on the nomination to decide whether or not to probably. So that remains an open question whether that will happen. So when but if I do get reconfirmed, I hope to continue the work that I’ve been doing in my current term, which is working on both opening the securities to be more friendly to innovation, working on trying to make sure that capital formation is working for every part of our country and making sure that our regulations are smart and an effective, but also take into account costs that they impose on poles to make sure that we get that balance right.
Q2. The world looks very different now than in 2018. Is there anything you’re hoping to move forward that perhaps wasn’t possible in the climate of your first term?
I think one thing that the current crisis has taught us is that we can do a lot more, not in a paper-based fashion. The way through that, sir, as we’ve grown up as a regulator, we did very tiredly. I think Corey did has made us all work from home and has made us realize that we can do a lot of things in this format that we’re doing this conversation now virtually.
And that’s made us realize, I think a regulator that we need to take advantage of the technology to enable us to regulate better, but also to illegal people to communicate with each other, to do securities transactions, taking advantage of the whole technology in terms of on the crypto side of things. I think a lot has happened in the last couple of years. And I think people are more and more recognizing that crypto will be here to say it will bring our society benefits. I think there is a little bit more openness toward trying to develop a framework that works for crypto. And I think you’re seeing interest from lots of different people and doing that. So I’m optimistic on that.
Q3. So many across the board, but especially in the tech space, have continuously cited that coronaviruses push the tech space to innovate years ahead of schedule. And we always hear this mantra that projects can’t just move fast and break things, but now in this moment of hyper innovation, and how does that affect how you see SEC is seeking to protect consumers, but also encourage business innovation?
Yeah, I think that’s a great question because we don’t necessarily move at the pace of innovation, which I think lots of people recognize. It’s really hard for a regulator to move as quickly. And so people are being forced to innovate faster. I think what we’re trying to do is, again, show openness toward people coming to talk to us and having those channels of communication over that. But to your point about people not just trying to innovate, break things, not worry about it on the way. we sent a pretty clear message that when things go in a bad way, we will commit enforcement actions. I think this era of coronaviruses has sort of been interesting because people take advantage of whatever situation you’re in, take advantage of other people.
Q4. One of those projects that I wanted to check in about the timeline on was your safe harbor proposal for crypto projects. Last we spoke even talked a bit about opening that up for feedback and really being excited to hear all that feedback. So what is some of that feedback?
We’ve gotten both good and bad feedback. But I think most of it is it positive that we’re going in the right direction with this? So what now I’m trying to do is look at ways that I can incorporate more investor protections. Or I don’t even like to call it investor protections because I think the way the safe harbor looks at it said we’ve got this three-year period during which you really don’t have to make a decision about whether this is securities offering or not.
So are there other ways that really solidify the protections that were in the original proposal? And you can give people more comfort about the fact that they’re going to be getting the information they need to make a wise decision about whether or not they wanna buy this, and that the developer team is going to be committing to hearing the certain rules that they set out before. My goal is not just it. Start a bunch of people engaging and offering for the sake of engaging and offerings. What I’m really aiming at is people who have projects that they want to launch and invite the world to be part of those from buying tokens. But they feel that they can’t because there’s too much uncertainty on the securities law side. So I think it’s trying to get the balance right of saying, we’re all about legitimate projects here. If you have other things in mind, this is not gonna be a way for you to go.
Q5. What are some of the changes that we could possibly see in a second draft? How are you taking that feedback and turning it into tangible points that are going to be in this second proposal?
The first proposal is very, very disclosure-based. I think that will be for what any second proposal is. But there may be a way to use the technology to try to bake in some rules that are then harder for people to violate and take the money and do other things with it. So are there ways that we can use the blockchain, actually, to act actually important that it did simple in on the developing and involve a team that’s kind of general, just what I’m thinking about me.
Q6. Yeah, and also in the past few months, we saw the rejection of the last big point exchange trade proposal before the s e c which prompted you to pen a dissent advocating for your fellow commissioners to stop applying so-called ever-shifting standards crypto projects, where we now on the path to a bitcoin yet.
It’s still a rocky path I as far as and I remain optimistic in the long term, but I think we put ourselves in a pretty difficult spot as a regulator because we’ve set out a standard for bitcoin, and presumably other crypto ETPS exchange-traded products that is really different from the standard that we’ve applied to other types of exchange-traded products with different underlines.
And so for us to what the market is maturing. And so that’s helpful. I think it will be helpful. And people coming in providing data to us and giving us comfort about how these markets work, which is when a lot of the underlying questions workout. But we have painted ourselves into a difficult spot. And I would like us to we consider that. So I’m continuing to make that argument that we need to apply standards that we apply for other types of products that are simple.
Q7. So as groups prepare to reapply for the first time, what are some of the key considerations that could possibly appease those ever-shifting standards, which sounds like doesn’t quite make sense by nature of the question? Is it a matter of the commission’s opinion on bitcoin changing? Or is there a way for a proposal, do you think to appease some of those standards?
I think a lot of people have been trying very hard providing to the staff of the commission in answer to some of those questions that are laid out in the disapproval orders. So trying to give sort of more comfort on how prices are developed, how these markets for what drives the price in the markets, those kinds of things. There’s really a lot of very sophisticated data analysis going into that. And I think there’s a there’s a good dialogue between SEC and people were trying to develop these products. I think as the futures markets, which we’ll have much more information coming from those markets, and we’ll have a better sense of how those markets interact with the spot markets.
Q8. And to shift to more the penalty side, the supreme court recently ruled on disgorgement a penalty that often crops up. You break down a few of the salient things and how it might relate to crypto cases.
This fortune is something that the sec it’s a remedy that’s actually something that the sec has gotten for point a number of years. And it essentially, if you have someone, a fraudster, for example, who takes a lot of money holds, not only do you wanna put a straight penalty on that person, but you’d like to get that money back from the fraudster so that you can then go and distribute it to the pickups.
So what the court did in this recent case is they said, you can get the sec has authority to get this Ford. But it has to think about these kinds of parameters in order for it to be disappointed that they’re allowed to get. And so one of the things is just that you would take the money and that you would normally wanna return that money to investors who or to victims who then are right.