As crypto firms attempt to navigate an increasingly fraught regulatory environment, federal agencies and lawmakers need to remember who they serve, argues Hester Peirce, commissioner at the US Securities and Exchange Commission.
“The government develops its own interest and starts to forget that it represents the peoples’ view on things,” Peirce said during a panel discussion at the Permissionless conference in Austin, Texas on Monday.
The path forward for the crypto industry in the US is going to be a challenge, Rep. Tom Emmer, R-Minn., said during the panel.
“It’s not good,” said Emmer, who serves as majority whip in the Republican-controlled House of Representatives. “The question is will [crypto innovation] happen here in this country, or are we going to push it out?”
Brian Quintenz, former commissioner at the US Commodity and Futures Trading Commission, who now serves as head of policy at a16z Crypto, agreed, adding that the industry is in a “pretty dark place” with regulators.
There have been some positive signs, though, according to Kristin Smith, CEO of the Blockchain Association.
“But what we started to see with Ripple, with Grayscale […] and now what we’re seeing with Coinbase, is that these companies are willing to pay the legal fees because they think that agency interpretation is wrong, and what we’re starting to find is that the courts are siding against the agencies and so I think that makes the industry’s position a lot stronger,” Smith said.
While the SEC and CFTC continue to issue enforcement actions against various players in the industry — only some of which have the resources to pursue lengthy and expensive court battles — Congress has attempted to move forward with legislation.
An essential part of positive, innovation friendly legislation making it to the president’s desk is educating leaders, Emmer said.
“The advocacy that you do everything,” Emmer said. “That’s what it’s all about is educating our members.”
The panel comes a day ahead of SEC Chair Gary Gensler’s scheduled testimony before the Senate Banking Committee, which is expected to focus on the agency’s oversight of the crypto industry.
In Gensler’s opening statement, released Monday, the agency chief doubled down on his long-term stance that crypto businesses need to conform to existing laws.
“Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well,” Gensler wrote. “Given this industry’s wide-ranging noncompliance with the securities laws, it’s not surprising that we’ve seen many problems in these markets.”
Peirce, known for dissenting many of the agency’s crypto-related decisions, told the audience that leaders need to think about how emerging technologies can be fit into a regulatory framework without sacrificing the rights of citizens and companies and their ability to innovate.
“There is also a philosophical battle that really does need to be waged in the sense of reminding people basic principles of privacy, liberty and the ability to interact with another person without having the government insert,” Peirce said.
She continued: “We have rules in place, and we have to figure out how to intersect with those rules, but I think there are also times when we should be asking questions about [if] we are getting something fundamentally wrong.”
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