SEC’s Peirce – Too many crypto regulators create confusion, Congress must act

• Commissioner Hester Peirce believes regulatory overlap could be ‘burdensome’ for crypto
• She implored Congress to provide clarity on jurisdiction of each regulator, where necessary

Hester Peirce, Commissioner at the U.S SEC (Securities and Exchange Commission), is in the news today after she urged Congress to clarify which agency should regulate crypto markets.

In her statement, Peirce claimed the SEC, CTFC, FinCEN, banks, and state and international regulators have a role in crypto regulation. However, she added that overlapping jurisdictions are prone to conflicts.  

“Overlapping jurisdiction can strain the brains, bank accounts, and briskness of both regulators and market participants…The risk of burdensome overlaps and conflicts is real.”

Crypto regulation – Call for congressional clarity

As part of mitigation, Peirce enlisted several ways Congress could solve this “regulatory overload.”

In enforcement, for example, she urged the U.S Congress to work with existing regulators (SEC, CFTC), rather than forming new ones. In addition, she suggested that laws should focus on platforms based in the United States. 

Moreover, for overlapping areas between state and federal regulators, the latter should reign supreme. 

On crypto trading, Peirce added, 

“Congress could make clear that a crypto asset sold in a primary transaction conducted pursuant, for example, to an SEC safe harbor, could trade on secondary markets on a CFTC crypto asset trading platform, unless the asset itself—apart from the investment contract—is a security.”

According to her, the clarification could be necessary in case of a potential dispute over the SEC’s authority to question a non-security asset being traded on an SEC-regulated platform. 

Finally, Peirce implored Congress to acknowledge peer-to-peer transactions and developers of such platforms. 

“Protecting people’s ability freely to interact directly with one another, including through software, will provide a healthy check on regulatory accretion at centralized trading platforms and serve to acknowledge software developers’ First Amendment rights.”

The new Trump-era SEC has become more pro-crypto than the previous regime. Apart from rolling back several Biden-era crypto investigations, the agency is conducting public engagements to clarify crypto security status, trading, custody, and DeFi, among other things.