Hester Peirce: US crypto laws can’t assume ‘everything is a financial asset’

June 29, 2023 Coin Telegraph

SEC commissioner Hester Peirce discussed a possible U.S. crypto legal framework, giving a reminder that not all uses are financial.

Cryptocurrency laws in the United States should be “reserved” and not regulate the technology as though every use is financial, argues a commissioner at the U.S. Securities and Exchange Commission.

On June 29, Commissioner Hester Peirce — dubbed “Crypto Mom” — appeared remotely at Australian Blockchain Week and was asked how she would regulate crypto, answering:

“I think we have to make sure that whatever regulatory framework you have doesn't just assume that everything is a financial asset.”

Peirce explained while crypto is thought of in “very financial terms” other uses exist such as enabling people to interact without requiring a centralized entity.

“That's useful in the financial context, but it's also useful in building a social media platform or whatever else,” she said.

Protecting investors is important, but the government needs to have a good reason to prevent people from investing their own money as they choose: https://t.co/QgPm38iSrp
— Hester Peirce (@HesterPeirce) June 27, 2023

Peirce believes any legal framework should take “a reserved approach” but include “enough clarity that people feel that they can try things.”

“There is something to be said for not putting a framework in place that is so inflexible that it doesn't accommodate the new uses of crypto and blockchain.”

In a seeming swipe at the SEC’s current approach — which many have criticized including Peirce — the commissioner said the laws “can't be reserved then, all of a sudden, [regulators] come in five years later with a bunch of enforcement actions.”

Asked about her crypto advocacy, Peirce said she thinks the SEC “can do better” and believes if she can't speak freely, “then I don't know why I'm in that position.”

“Crypto presents [the SEC] an opportunity to rethink how we approach innovation [...] I really think we've been taking an approach that is not appropriate,” she said.

Alluding to the collapse of FTX and the allegations of misconduct that followed, Peirce advised the crypto industry to undertake self-regulation and pay attention to counterparty risks, conflicts of interest and leverage.

“Those are things you don't need a government regulator to tell you to do, but I think government regulators can play a role in that.”

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FTX fall was ‘incredibly damaging,’ crypto must foster real utility: Ripple policy lead

November 28, 2022 Coin Telegraph

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Ripple’s APAC policy director said the collapse of FTX is exactly why crypto needs to move away from "hype cycles" and towards "real utility."

Ripple’s APAC Policy Director has described the fall of FTX as “incredibly damaging” for the crypto space, but says the industry should stand the test of time if its focus shifts towards building “real utility.”

In a statement sent to Cointelegraph, Ripple’s APAC policy lead Rahul Advani said he expects the FTX saga to lead to greater scrutiny on crypto regulations, while governments will re-evaluate “their stance towards crypto and blockchain technology,” adding:

“The collapse of FTX is incredibly damaging for the crypto space and once again underscores the need for greater regulatory clarity.”

Advani argued that the industry will need forward-looking and “flexible” regulations to boost confidence in the crypto sector while protecting consumers.

“[These regulations] must include robust measures for consumer protection but also recognize the different risks posed by business-facing crypto companies.”

“What we don't want to see is a knee-jerk response that could stifle innovation within the sector,” he added.

Following the collapse of FTX, a number of regulators around the world pledged to focus on developing greater crypto regulation.

The Australian government is doubling down on its commitment to a crypto regulatory framework and the International Monetary Fund (IMF) called for more regulation in Africa’s crypto markets, one of the fastest-growing in the world.

Meanwhile, United States Commodity Futures Trading Commission (CFTC) commissioner Summer Mersinger said on Nov. 18 that the time to act on crypto regulation may have arrived, prompting experts to warn that crypto is in the crosshairs of U.S. lawmakers.

Advani however noted that a “one size fits all” approach to regulation “will not work” due to differing risk profiles presented by crypto companies. He instead advocated for a “risk-based approach” to regulating the industry.

He added that risks posed by crypto businesses include requirements on conduct, like segregating business accounts, disclosing conflicts of interest, and providing “retail investor safeguards.”

“We still firmly believe that crypto is here to stay and that real use cases will withstand the test of time,” Advani said.

“I think that the crypto industry will have to take a more focused approach, shifting from hype cycles toward building real utility.”

ASIC’s Longo pledges action against certain ‘high-risk’ crypto products

November 3, 2022 Coin Telegraph

ASIC

The chair of Australia’s market regulator has warned that “action will be taken” on financial product issuers who promote risky products to a wide consumer base.

Australia’s financial services and markets regulator has issued another glaring warning towards issuers of crypto-based financial products, particularly those inappropriately marketing high-risk products.

Joe Longo, chair of the Australian Securities and Investment Commission (ASIC) in an opening speech at the ASIC annual forum on Nov. 3 local time said it will use current laws to police “risky and complex products” to protect consumers.

He added, “crypto and the crypto ecosystem continue to pose challenges and opportunities for regulators and policymakers alike” saying the risks with crypto investing are “often opaque” with the assets being “highly volatile, inherently risky, and complex.”

While his warning encompassed non-crypto-focused firms too, Longo took particular aim at issuers of crypto-based financial products, putting them on notice if their offering doesn’t pass ASICs muster:

“Too often, issuers are seeking to market high-risk and niche investment products, including in some cases crypto-based products, to a very wide range of consumers.

We’re seeing issuers promoting high-risk products as appropriate investments that will make up a significant portion of an individual consumer’s investment portfolio. This will not be tolerated and action will be taken," he warned.

Longo said ASIC is continuing to use rules enacted in Oct. 2021 for financial products to have stricter target market determinations (TMDs) and disclosures of significant dealings outside of those TMDs to police “risky, volatile, and complex products.”

ASIC recently used these powers on Oct. 17, halting three cryptocurrency-related funds set to be offered to retail investors, due to non-compliant TMDs saying to Cointelegraph that they were “too broad [...] given the volatility and speculative nature of crypto markets.”

Longo took a seemingly softer approach towards blockchain and asset tokenization technology, noting it as having the potential to “provide new solutions to longstanding problems” and “revolutionize the way we do commerce.”

He noted the regulators' work supporting the pilot of a local Central Bank Digital Currency (CBDC) saying ASIC is monitoring developments of the pilot and how it will respond and adapt, adding:

“While encouraging digital innovation, ASIC will act to disrupt and deter conduct that harms people. Harmful conduct that falls within our jurisdiction, including unlicensed conduct and misleading promotion of crypto-asset financial products, is within our sights.”

At a panel on cryptocurrency later in the day, Longo said crypto “the capacity for consumer and investor harm is really, really significant” when trading digital assets and reiterated the difference between crypto and blockchain technology:

“My central message for consumers is that this is a risky, speculative, and poorly understood activity, which has to be distinguished from the innovation of the underlying technology.”

Longo said that crypto brings together “key issues that ASIC is interested in: technology, innovation, and new challenges for regulation.”

He spoke on the three “cornerstones” of ASICs crypto regulation strategy which are supporting the development of a regulatory framework and greater legal clarity for crypto and gathering information from international peers to inform the government on an effective legal framework along with continuing to disrupt and deter scams involving crypto.

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