SEC Commissioner Does Not Support Crypto Bailouts, Says Market Crash Reveals True Innovators

SEC Commissioner Hester Peirce is among those who believe the recent crash could give the industry a more sustainable foundation for the future.

“When things get a little harder on the market, you find out who’s building something that can last a long time and what’s going to go away,” Peirce said in an exclusive interview with Forbes last Friday.

But that’s not the only benefit she believes could come out of this market recession.

It can also be a valuable learning opportunity for market participants and the regulator to see how the cryptocurrency market works during times of acute stress. “It’s useful for us to see the connection points. It’s a time, not only for market participants to learn, but also for regulators to learn, so that we can have a better idea of ​​how the market works.”

While it is painful, and Peirce has made it clear that he does nothing light of anyone’s suffering through the descent, he is right in this assessment.

After all, it has been four years since the industry saw such a collapse, long before many key government officials took office. For her part, Peirce was confirmed as an SEC commissioner in January 2018, just as the initial currency market was on the verge of collapse. However, institutional money had not yet reached space, derivatives markets were in their infancy, decentralized finance (DeFi) had not yet become prominent, and virtually no one had heard of an NFT.

Does this mean that the regulator is going to stand idly by and watch from afar? Certainly not.

Peirce noted that the SEC could get more advice on acting during bearish times than bullfighting. “Scammers and fraudsters will find ways to take advantage of any set of market conditions to try to take advantage of other people. So I’m sure their tactics are changing and they are sometimes taking advantage of people at their lowest points … maybe we are more likely to receive advice at times like this. “

The SEC also keeps abreast of any cryptographic activity that falls under its jurisdiction and continues to educate people about red flags. For example, he noted that investors or depositors should be critical of those who promise to offer consistent double-digit returns. Without referring to any particular company or service provider, though prominent crypto lenders such as Celsius, BlockFi and Babel Finance have been strained in recent weeks, Peirce said: “When you have an attractive performance, you should ask questions about its performance. “And if you don’t get answers, then you have to think about whether you want to make that investment.”

But in our discussion, Peirce made it clear that he does not support bailouts for anyone in the industry. Noting that Congress does not accuse the SEC of being a systemic risk regulator, Peirce said he would not support the use of bailouts to save cryptocurrency companies anyway. Especially not the companies that avoided the main principles of risk management, over-leveraged and gambled to the limit.

“Crypto doesn’t have a rescue mechanism. And that was perceived as one of the strengths of that market. I don’t want to go in and say we’re going to try to find a way to rescue it if we don’t have the authority to do it. But even if we did, I wouldn’t want to. to use that authority, we really need to let these things go. ”

However, this naturally leads to the question of how the industry, and perhaps regulators, can prevent history from repeating itself once the snow of this cryptographic winter settles, as long as it does. Things will not be easy.

A good barometer of the challenge is the tortured history of cryptocurrency-focused regulation in Congress. There have been several attempts to answer key questions for the industry, such as whether a token should be a commodity, a security, or something else. Peirce herself even created a Safe Harbor proposal that would give regulatory relief to early symbolic projects so that they had enough track to decentralize and stop being values.

All of this matters because these designations determine regulatory jurisdiction. If a token is a security, then the SEC is involved. The commodities are out of track though curiously its sister agency, the Commodity and Futures Trading Commission (CFTC), which currently oversees derivatives markets and digital commodity-based contracts.

The next best change is a recently introduced Responsible Financial Innovation Act, bipartisan legislation led by Senators Cynthia Lummis (R-WY) and Kirsten Gilibrand (D-NY), which aims to provide greater regulatory clarity to the industry in particular, from symbolic taxonomies to stablecoin regulations and de minimis exemptions for small cryptographic transactions so that a user does not have to pay capital gains taxes on cryptocurrencies used to buy a coffee. One of the main goals is to try to resolve cluttered jurisdictional issues between the SEC and the CFTC, and industry observers believe the proposed legislation would tip the scales in favor of the CFTC.

For his part, Peirce is cautiously optimistic about the legislation and, in general, supports more cryptographic conversations on Capitol Hill. It does not appear to be territorially within the jurisdiction of the SEC or annoying because its Safe Harbor proposal has not been implemented. She just wants a clear direction that everyone can follow. “I have no pride in that bill.[apropostadeSafeHarborSenosmovemosaoutrolugaretemosunmarconormativoqueofrezaclaridadeisoéoquebusco”[theSafeHarborproposalIfwemovesomewhereelseandhavearegulatoryframeworkthatoffersclaritythat’swhatI’mlookingfor”

Of course, that will be easier said than done. After all, there is no perfect legislation, and specific technology approaches present many challenges, such as ensuring that they are adaptable to changes and market developments. After all, five years ago virtually no one saw that stable currencies or NFTs would come to dominate popular discourse the way they had. So there’s something to be said about function-based regulation rather than technology.

Peirce appreciates these feelings and tends to prefer the former, but still believes there is room for exceptions. “I was a little critical of technology-specific regulation. And to some extent my own Safe Harbor falls into that category of having a special focus on this specific technology. My response to this is that Congress has given us authority over our value laws. original to adapt and use free applications to provide conditions and relief to a specific technology.You want to keep the law as technology neutral as possible so that it ages well … at the same time, I think sometimes you have to recognize the unique features of the technology.

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