SEC commissioner breaks with SEC, Gensler on crypto regulation


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Hester Peirce, commissioner of the US Securities and Exchange Commission (SEC), speaks during the DC Blockchain Summit in Washington, D.C., on Tuesday, May 24, 2022.

Valerie Plesch | Bloomberg | Getty Images

Hester Peirce of the Securities and Exchange Commission publicly rebuked her agency’s apparent crypto regulation by enforcement, asking if a “hostile” regulator is the best solution for the industry.

Peirce, who was appointed to her post as commissioner by President Trump in 2018, wrote in a statement on Thursday that she disagreed with the SEC’s assertion that the shutdown of crypto exchange Kraken’s staking program was a “win for investors.”

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The SEC action against Kraken, which was settled without an admission or denial of wrongdoing, alleged that the exchange engaged in the unregistered offer and sale of securities through its crypto lending platform. Peirce said that’s not the primary issue.

“Whether one agrees with that analysis or not, a more fundamental question is whether SEC registration would have been possible,” Peirce wrote. “In the current climate, crypto-related offerings are not making it through the SEC’s registration pipeline.”

Without directly mentioning SEC chair Gary Gensler, Peirce took aim at what Coinbase CEO Brian Armstrong described on Wednesday night as the SEC’s “regulation by enforcement.”

“Using enforcement actions to tell people what the law is in an emerging industry is not an efficient or fair way of regulating,” Peirce wrote.

Gensler, lawmakers and the White House have called for more robust regulation of the cryptocurrency industry. But Gensler and the SEC Enforcement division under his control have moved far more aggressively than the Department of Justice or policymakers to tamp down on the crypto industry.

In a press release announcing the Kraken settlement, SEC enforcement director Gurbir Grewal said that the action was a step to curtail companies whose “investors lack the disclosures they deserve and are harmed when they don’t receive them.”

Peirce, who dissented on the enforcement action, indirectly disputed the premise of that assertion.

“Most concerning, though, is that our solution to a failure to register violation is to shut down entirely a program that has served people well,” she wrote. “However, whether we need a uniform regulatory solution and if that regulatory solution is best provided by a regulator that is hostile to crypto, in the form of an enforcement action, is less clear.”

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