SEC Commissioner Hester Peirce slams regulator's 'unproductive' approach to overseeing crypto

The Securities and Exchange Commission's Hester Peirce slammed the regulator's approach to overseeing cryptocurrency, calling parts of its stance "unproductive" and "pointless." 

Peirce, a Republican commissioner at the SEC nicknamed "Crypto Mom" for her supportive stance on crypto, spoke Thursday afternoon at ETHDenver about the agency's approach to regulating that industry. 

The SEC's enforcement team has been active over the past year, most notably bringing big cases against crypto exchanges Coinbase and Kraken as well as NFT creator Stoner Cats for not registering with the regulator. 

"You don't go after people who are asking you for some clear rules around how to proceed in this space," Peirce said on Thursday. It makes sense to go after bad actors engaging in fraud, Peirce added. 

"But when you're talking about registration violations, because someone has touched a crypto asset, that we then come in years later and say ah, that is a security," Peirce continued, "It seems pointless because you're bringing a case against someone where there's no allegation that anyone was hurt." 

She added that she was not minimizing the importance of registration obligations. 

"But if you're not willing to tell people what a security is, it seems very unproductive to go in after the fact and just start picking people off for not having registered," Peirce said. 

SEC Chair Gary Gensler, who presides over Peirce and three other commissioners, has taken the stance that many cryptocurrencies are securities and has called on crypto platforms to register with the regulator and abide by its securities laws. The crypto industry, meanwhile, has said clarity is needed on how the rules apply to them. Coinbase filed a rulemaking petition in 2022 to get new rules specific to the industry, but the SEC has brushed it off and says existing rules apply. 

Lawmakers in Washington too have been working on legislation for years to regulate the industry, but have not yet come close to getting in front of President Joe Biden to sign. 

A safe harbor

Peirce was also asked Thursday about her safe harbor proposal, which she debuted back in 2020. 

The safe harbor proposal "seeks to provide network developers with a three-year grace period within which, under certain conditions, they can facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws," Peirce said in 2021. 

An updated version would require the projects to make semi-annual updates and an analysis explaining why the network is decentralized or functional. Peirce told ETHDenver on Thursday that the industry needs to work on their ideas and "have them ready to go." 

"I always say well maybe Chair Gensler will wake up tomorrow morning and have an epiphany and will be in a different place, so we need to have ideas on the shelf ready to go when that happens," Peirce said. 

The unspoken implication: while Gensler’s term as chair ends on June 5, 2026, a newly elected President, especially a Republican, may ultimately seek to appoint a new SEC chair friendlier to the crypto industry.

Mum on an spot Ethereum ETF

Peirce was also asked Thursday about where the SEC was on potentially approving a spot Ethereum exchange-traded fund. 

"I'm going to use the lawyer's answer again and say it's under consideration at the SEC," Peirce said. 

Big name firms, such as Fidelity and BlackRock, have applied for a spot Ethereum ETF over the last few months as some analysts predict that the SEC could approve those products as early as May of this year. Others have said it could still be a year or two out. 

SEC Chair Gensler suggested last month that the regulator's decision to approve spot bitcoin ETFs earlier this year shouldn't necessarily signal how it might respond to Ethereum in the future.