Crypto Mom: Cryptocurrency Projects May Have Benefited from Lack of Regulation
Hester M. Peirce, aka the beloved “Crypto Mom,” spoke openly on the state of the cryptocurrency industry, speculating that it may owe some thanks to the turtle pace of the U.S. government on the road to regulation. Her words came as part of an address to the University of Missouri School Of Law, February 8, 2019.
At first, a regulation-free cryptocurrency and blockchain industry was doing exactly as it should, operating without the involvement of a centralized authority. Though as we know, this hasn’t been a wholly positive experience for the industry.
With regulation at the crux of her speech, Peirce described the “freedom” that cryptocurrency projects are experiencing in a relatively unregulated sector, and as such, have had the opportunity to experiment and develop almost without restriction.
Peirce, Commissioner of the United States Securities and Exchange Commission (SEC), spoke thoughtfully with regards to the curveball of blockchain and cryptocurrencies that has been thrown to regulators, which has caused the SEC to “rethink its approach to innovation.”
“We, along with other regulators, are asking how existing rules apply in this space and whether a new regulatory framework would work better. If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the objectives of our securities laws—protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets.”
Decentralization was also noted as a key challenge to regulation, though in this, she thinks that the grey-area in which the industry presently operates has had its benefits, saying:
“Ambiguity is not all bad, of course. We might be able to draw clearer lines once we see more blockchain projects mature. Delay in drawing clear lines may actually allow more freedom for the technology to come into its own.”
Pierce also points out that the SEC’s present stance on initial coin offering (ICO) token classification, which is based on the infamous Howey Test, may not necessarily be healthy for an emerging ecosystem. She espouses that “the SEC must take care not to cast the Howey net so wide that it swallows the ‘efforts of others’ prong entirely.”
Citing her own views on the matter, she referred to the Basis stablecoin project, which shut down operations in December 2018 and returned $133 million to investors. According to Peirce, this was a result of the specific challenges the company faced complying with securities regulations, which she prefaced as being a “difficulty—if not impossibility.”
Without offering too much of her opinion on “the merits of any particular project or how the securities laws apply to it,” she said:
“[My] antennae will go up when apparently legitimate projects cannot proceed because our securities laws make them unworkable.”
In some regards, Peirce believes that the industry could be approaching a state of over-regulation which could be due to the imbalanced nature of slow-regulation, and a burgeoning high-tech sector.
Regardless, Crypto Mom has spoken, revealing once again that inside the contentious workings of the SEC, an open mind sits in a powerful position that may prove to be an extremely beneficial one for cryptocurrency and blockchain technologies.