As a professional translator, I would translate the news article as follows:
It is well known that Hester Peirce, also known as “Crypto Mom” due to her controversial views, has discussed the operations of the SEC, why she wants to see cryptocurrency flourish, and how her “safe harbor” proposal allows for decentralization.
The U.S. Securities and Exchange Commission (SEC) is not a single entity. Hester Peirce, currently serving her second term as one of the five commissioners, has become known for her advocacy of protecting cryptocurrencies and blockchain technology, often writing dissenting opinions on the SEC’s legal actions against crypto protocols and companies.
To some extent, the differences between Peirce and SEC Chairman Gary Gensler stem from their different philosophies and political beliefs. Peirce, a Republican and member of the Federalist Society, believes that the government should have limited intervention in business regulation. On the other hand, Gensler, who often frequents Democratic circles, has more elusive views. Although Gensler has shown support for crypto during his time teaching blockchain at MIT, Peirce has remained steadfast in supporting economic innovation.
In an interview with CoinDesk, Peirce stated, “It is a fundamental American principle that people have the right to make choices. The government’s existence is not to protect people from their own choices, but to protect them when others harm them, and not to make life decisions for them.” This viewpoint has influenced Peirce’s stance on whether the SEC should block spot ETH exchange-traded funds (ETFs), pursue U.S. domestic exchanges like Coinbase and Kraken, and what role the agency should play in supervising the crypto market.
CoinDesk caught up with Commissioner Peirce before the 2024 Consensus conference, where she plans to speak about the SEC’s enforcement actions, her disdain for big banks, and where U.S. crypto regulation went wrong.
Interviewer: Hi, Crypto Mom. Let’s start with a simple question. Could you describe the basic differences between you and SEC Chairman Gary Gensler?
Peirce: This is not a simple question. First of all, the views I represent are my own and not necessarily the views of the SEC or my fellow commissioners, so I cannot speak for anyone else on the committee. Are you talking specifically about crypto issues or a range of issues?
Interviewer: I think we can expand the discussion. What are your basic political or philosophical differences?
Peirce: Philosophically, my view is that I don’t necessarily know what is best for other people. We have statutory duties that we must carry out. But within those duties, we are often given discretion. And if we have discretion, my preference is to say, well, let the market participants decide what they want to do. Sometimes, we have to step in the middle of a transaction and say, “No, you can’t do that” or “Yes, but you have to do it in this specific way.” But we better have a very good reason to intervene in that transaction.
(Interview reference: SEC in ‘Enforcement-Only Mode’ for Crypto, Commissioner Peirce Says)
It is a fundamental American principle that people have the right to make choices. The government’s existence is not to protect people from their own choices, but to protect them when others harm them, and not to make life decisions for them.
Interviewer: In the past, you have been critical of big banks, but also believed that the regulatory response to the financial crisis veered off track. I’m curious if this is related to your interest in crypto?
Peirce: I think my interest comes from several things. First, I think it’s a good opportunity to test how we handle innovation – or maybe it’s a bad test, because I don’t think we’ve passed. Crypto brings in a lot of new participants and new ideas. I think we should find a way to work with these new participants and find a way to allow them to do what they want to do in a regulated manner, but also allow them to move forward.
In a sense, this is connected to how I looked at the financial crisis – many people have studied it and come to different conclusions about the causes – one of the things that was happening was bad regulatory design. A regulatory design that led everyone to make the same foolish mistakes at the same time. One way to solve that problem is to build resilience into the system, and heterogeneity in the system is a good way to build resilience. There are some interesting concepts in crypto that allow for more decentralization in the financial system.
So, in that sense, there is a connection. But do I think the future will be decentralized and replace centralized intermediaries in the financial system? My prediction is no; people want to deal with a centralized intermediary. But I think decentralized finance will have a role. Maybe behind the scenes. Perhaps more than that. I predict that most people will access it through a centralized intermediary. I could be wrong.
Interviewer: You don’t have to answer this question, but do you hold any cryptocurrencies?
Peirce: Because I’ve been dealing with these issues, I don’t and I wouldn’t even if I could. I think there would be a conflict there. If you’re dealing with these issues, you basically can’t own cryptocurrencies. I’m just saying that’s the rule for me.
My editor has a question: What happened there? Is this an example of the SEC picking winners?
Peirce: I won’t comment on any specific entities.
Interviewer: Fair enough. Your safe harbor proposal makes sense, but in the few years since you released it, I think it’s safe to say that three years might be too short of a time for protocols to become decentralized. Solana, Cardano, and even Ethereum to some extent have centralized entities guiding their development – nonprofit organizations formed alongside the networks. Do you think we should consider a longer timeline for decentralization? Decades, perhaps?
Peirce: Again, decentralization itself is not the goal. In some cases, it is the right thing. However, sometimes having a centralized entity is the right thing. We should all step back and think about what goals we want to achieve. Fundamentally, what we need to achieve is to let people know whether they are dealing with a security, so that when they do something or sell something, they understand whether it is a security offering.
They need to know this in the primary and secondary markets. Then, if we decide that certain crypto assets are securities, or that adjusting the rules doesn’t make sense, then there should be a reasonable framework that makes sense for crypto assets. Does it make sense to set up some disclosure system for centralized entities? That’s really a decision for Congress. But we can’t even have these discussions at the SEC right now because the conclusion is just to apply the exact same rules that apply to stocks and be done with it – I just think that doesn’t work.
But just stepping back and thinking about the problems we’re really trying to solve might alleviate some of the pressure on decentralization.
Interviewer: How closely do you and the other four commissioners work with the enforcement division? Which cases do you suggest pursuing?
Peirce: Actually, it’s more to give you a sense of how the enforcement side works. Just like rulemaking, the staff does most of the work. They will consider a case and present it to us, and we will consider it. The votes usually happen in an open public meeting. For enforcement actions, we also get recommendations. Usually, the staff will recommend authorizing an enforcement action and settling it at the same time. So, we usually don’t see the case until the end and are not involved in the core of the matter. So, either we authorize the department to sue, or we authorize you to sue and settle on the same day with them. Most of our cases are settled that way. The voting happens in a process called seriatim, where we just vote on the papers, or we have a discussion and vote at the meeting, but those meetings, as you might guess, are not open to the public.
Interviewer: So, in a way, if there is a change in administration in the upcoming election, the existing enforcement mechanisms can more or less continue, right?
Peirce: I think these are good questions because the structure of the agency is a little odd. Odd in the sense that it doesn’t function like many other agencies with a single head. But while we have five commissioners, Chairman Gary Gensler does have the power to set the agenda for rulemaking, and the staff reports to him. The chairman can certainly push things in a certain direction, but you’re right that when a new chairman comes in, not all existing enforcement investigations will stop. The agency is designed to continue functioning.
Interviewer: If Trump or Tulsi were elected, would you accept this job?
Peirce: I haven’t even thought in that direction.
Interviewer: No?
Peirce: Yes, I’m focused on the present and trying to move us in a better direction. I’ve been here for six years and it’s been very frustrating to see us not take a productive path. For me, we have to take a productive path sooner or later – so why not now? What are we waiting for?
Interviewer: This is not a question about now, but I’m curious what changes have happened to the agency since your early tenure in the SEC in the early 2000s?
Peirce: Over the years, we have become more prescriptive in our rulemaking. One question I posed in a speech last week was that we have become less willing to have difficult conversations with the staff and the public. That’s not a positive change.
Interviewer: Is there reason to believe or hope that the process for a spot market ETH ETF will not unfold like the spot market Bitcoin ETF?
Peirce: I can’t comment on that because we are considering some applications.
Interviewer: Do you think the DAO report in 2017 wrongly kicked off crypto regulation?
Peirce: Yes, I think so. Because I think the facts of the DAO report were different from the facts of most of the crypto products we see, right? Facts are unique. I just think that applying the legal analysis we used to think about tokens doesn’t help us solve the real problem.
(Interview reference: SEC Blasts ‘Purportedly Decentralized’ DAOs in $1.7M Barnbridge Settlement)
So if I could do it all over again – I wasn’t there for the DAO report, although I learned a lot during that time – I would change the way we handle things.
Interviewer: Do you agree with Judge Failla’s interpretation in the XRP case that tokens are not necessarily securities, but when you sell them to qualified investors, it becomes an investment contract?
Peirce: Again, because that’s litigation, I don’t want to talk about any specific judge’s opinion. But as I’ve said in other cases, when you think about an investment contract, whether it’s a digital asset or any other type of tangible asset, the asset itself is not a security. It’s when you offer that asset along with an investment contract that it becomes the thing that makes it a security. It becomes the object of the investment contract. But you still need to think of those as separate things. The orange groves in Howey itself were not securities.
Interviewer: Your dissenting opinions are often quite artistic. Is it your own ideas or your co-author Mark Uyeda’s idea to include a script in the ShapeShift document?
Peirce: I can’t answer that question either.
Thank you again for your time.
Peirce: Well, thank you for taking the time, and I hope you have a pleasant afternoon.
