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SEC’s 'Crypto Mom' demands innovation, says you can’t prosecute an algorithm



The commissioner of the SEC, Hester Peirce, told an audience at CFC 2021 that crypto regulation should be focused on innovation, and that the U.S should be number one.
SEC Commissioner Hester Peirce spoke at the CFC 2021 virtual blockchain conference on Jan. 20, where she discussed the prospect of working with a new Biden-appointed chairman, and touched on her hopes of providing the cryptocurrency space with some “safe harbor”.
Known affectionately by cryptocurrency enthusiasts as “Crypto Mom”, Peirce addressed the changeover at the SEC that saw former chairman Jay Clayton depart his post in December. Incoming President Joe Biden has since nominated Gary Gensler for the role.
Peirce said Gensler’s appointment was not yet set in stone, but that the appointment of any new chairman brings an opportunity to approach things with a new set of eyes:
The SEC commissioner touched on the perennial “Sword of Damocles” that’s been hanging over the cryptocurrency space since its inception: Namely, regulation. But the goal of regulation should be to provide clarity, according to Peirce, adding that she hoped the new chairman would make sure the U.S was still conducive to innovation.
“We really need to embrace innovation, and figure out how we can set up a regulatory environment that’s conducive to innovation, which I think in our space means providing clarity. And so I think that’s something the new chairman will be faced with from day one,” said Peirce.
In February 2020, Peirce told an audience at the Blockress blockchain conference in Illinois that she thought the SEC’s “Safe Harbor” provisions should be applied to cryptocurrency launches. Currently, as Peirce explained at CFC 2021, new projects are under pressure to prove their non-security status from day one.
“If you can’t prove that your token is functional from day one, or that your network is decentralized, you may very well run into a situation where, under the securities laws, it’s treated as a securities offering,” said the commissioner.
But if Peirce’s proposal to apply Safe Harbor status to crypto launches gains traction at the SEC, it would grant projects an initial 3-year window during which regulatory liability would be ramped up gradually for the purpose of fostering innovation. Peirce said:
Peirce said her proposal got “a lot of great feedback”, although not every observer necessarily agreed at the time, with some characterizing Peirce as cutting a lone crypto-friendly figure in a world of blockchain skeptics.
However, with the impending arrival of a new SEC chairman just around the corner, Peirce has reason to be optimistic. She said:
Peirce was also asked about the recent announcement by the Financial Crimes Enforcement Network (FinCEN) that cryptocurrency owners with more than $10,000 in foreign accounts would soon have to report their holdings to the U.S Treasury Department. She questioned the practicality, and morality, of the FinCEN’s proposal, adding:
The very presence of decentralized finance would also obstruct any such attempts at financial surveillance by FinCEN. As Peirce rightly points out, it can be difficult to identify a legally culpable counterparty when that counterparty might not even be a human being.
“You might not have a physical address for the person, or a name for the person — because it might be an algorithm. When you have a smart contract, how do you actually identify a person or a physical address?” she asked rhetorically.


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