Name: Insights: SEC Commissioner Supports 'Safe Harbor' Approach to Cryptocurrency
Uploaded: 2020-02-25
Duration: 7 min 37 s
Description: 'Crypto-mom' Hester Peirce thinks US regulators should offer guidelines around cryptocurrencies.

[MUSIC PLAYING] HESTER PIERCE: My desire is to see capital flow to the places where it can be put to its best and highest use, and that requires investors get information that they need to make the decisions about what they think where they think their money will be put to best use. JEFF ROBERTS: But can you do this is without a new act of Congress? I know I think also the FCC has got its tool box and it's not really built for the crypto world. So they have to obey the laws that are written. I mean, is there more the agency could do with the existing laws, or do we need Congress to step in? And if so, what's the first thing Congress should do? HESTER PIERCE: Well, Congress is my boss, so I don't tell it what to do. But I think that we should remember there are securities laws are-- they've been around for a while, and they're fairly flexible, and they're designed to be able to accommodate and adapt to new types of technology. That said, so I guess I went into this when I first took the job on and started thinking about how the securities laws apply to crypto. I thought, we don't really need to do anything new. We just need to apply the laws that we have and they can accommodate cryptocurrencies as they do other things. But as I thought about it more, I really do think that a safe harbor approach might be the right approach in this space. Where you would say, here's what you need to tell people about what you're doing about the project. Here are the types of things that people investing in crypto projects want to know. And if you comply with these things and you tell people these things, then you can go ahead and you can issue these without having to worry about the whole panoply of securities regulations. And so that is something that Congress could direct us to do. We have the authority to do it on our own. But sometimes when we don't act, Congress does act, and tells us, we want you to be able to do something like this. I'm eager to have this new technology be tested. And I love seeing different formulations of it popping up. Facebook has most recently come out with a formulation of their version of a cryptocurrency. I have not personally talked to Facebook about what their plans are. I've read their white paper-- not they have a full technical white paper, which I haven't read, but I've read their broad white paper and it contains some of the aspirational vision that I think is possible for cryptocurrency. I mean, one of the things that excites me about it is that it's really a way to bring the world together so that people can collaborate from all across the world and get paid for their contributions to projects in ways that they're actually-- it doesn't involve complicated currency transactions. Everyone can get paid with the same currency. So it's almost like the money to go along with the internet. And I think that's where the potential value of cryptocurrency lies. There are other potential uses, but that's one value I see in it. And so Facebook, it's not surprising in some ways that they have thought, how can we take advantage of the user base that we have all over the world? It's not surprising to me that they're thinking about that kind of thing, because they do have such global reach. But again, it's not something that I've spoken with them about. And we'll see what happens as they have conversations with regulators, which I understand they're doing now. JEFF ROBERTS: One point of contention in the hearing this morning was the way Libra set up its Swiss foundation, which I think some of the senators were hammering Marcus on, saying, what are you doing overseas? But I've also heard that the American legal infrastructure just isn't built for something like this. And this is Switzerland is just simply a better option, which raises the larger question-- is America's forfeiting some innovation to places like Switzerland or Asia? Or are these places just sort of run and gun and bad news? HESTER PIERCE: Well, I think that's one of the worries that I have. I want to make sure that this country is the most open innovation of any country. And one of the problems that you have when you have an established regulatory system that's been in place for a while is that we're pretty slow to move. And so we've got people at the FCC who are working intensely on these issues, and they're thinking about the proper approach. But as you can see with the way our guidance is sort of trickling out, it takes us a really long time to make a decision. And it takes us a really long time to issue anything. So we're not that nimble. Regulators just tend not to be nimble. We're inherently conservative because we worry about something going wrong and someone coming back and blaming us when things go wrong. And certainly that happens. And so it's no surprise that people are conservative. That said, other regulators in other places have taken a different approach. And I think they're seeing innovators come to those places because they feel more comfortable there. And they feel there's certainty there. So one, yes, I worry about the innovation leaving our shores. And I also worry about US investors being precluded from participating in those projects, because it's easier just to say we don't want any US investors just to avoid having any interaction with the regulators here. JEFF ROBERTS: Hester, you're a lawyer, but also an economist. Just like to go to the real big picture stuff for a second, because I find it interesting, this notion of new non-sovereign currencies out there. And there's also debate of countries like Russia and China are trying to get away from the US dollar because the US dollar is one of the country's greatest assets. Lets us borrow cheap, it's the sort of a strategically powerful thing to have. Do you think blessing these sort of like non-sovereign currencies could risk accelerating the move away from the US dollar? HESTER PIERCE: Well, I should say I'm not an economist. I'm a wannabe economist. I did major in it in college but don't have a PhD because I'm not good enough at math. But if I were an economist, I certainly would not be a macro economist. I would be a micro economist because I think micro is what matters. And so that's how I approach these cryptocurrency issues. I think the micro payment aspect that the fact that individuals can decide to interact with one another using a cryptocurrency is really powerful for individuals that they're able to control that. And it's-- the decentralized nature of how these projects work I think is really interesting, because it's a way for people to collaborate and be rewarded for their collaboration and their contributions. So I think it challenges a lot of notions that we have, existing notions that we have about how lots of things work. And I think one of those things is if people can figure out a way that's very efficient for them to contribute and be rewarded for their contributions they're likely to gravitate toward it. I am free market. So I think people should be able to decide what is most efficient for their transactions. 

Insights: SEC Commissioner Supports 'Safe Harbor' Approach to Cryptocurrency

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Hester Peirce thinks US regulators should offer guidelines.

SEC Commissioner Supports Cryptocurrency

"Crypto-mom" Hester Peirce thinks US regulators should offer guidelines around cryptocurrencies.

My desire is to see capital flow to the places where it can be put to its best and highest you and that requires investors get information that they need to make the decisions about what they think, where they think their money will be put to better use. But can you do this? Is that a new act of Congress that No, I think also, the SEC has got its its toolbox, and it's not really built for the crypto world. So you know they have to obey the laws that are written. I mean, it's in where the agency could do with the existing laws. Or do we need Congress to step in? And if so, what's the first thing Congress should do? Well, Congress is my boss, so I don't tell it what to do. But I think that we should remember their securities laws are they've been around for a while, and they're fairly flexible, and they're designed to be able to accommodate, um and adapt to new types of of technology That said so. So I guess I went into this when I first took the job on and started thinking about how the securities laws apply to crypto. I thought, you know, we don't really need to do anything new. We just need to apply the laws that we have and they can accommodate crypto currencies as they do other things. But as I've thought about it more, I really do think that a safe harbor approach might be the right approach in this space where you would say, Here's what you need to tell people Tell people about what you're what you're doing about the project here, the types of things that people investing in crypto projects want to know. And if you if you comply with these these things and you tell people these things, then you can go ahead and you can issue these without having to worry about the whole panoply of securities regulations. And so that is something that Congress could direct us to do. We have the authority to do it on our own, But sometimes when we don't act, Congress does act and tells us No, we want you to do something like this. I'm eager to have this new technology be tested, and I love seeing different formulations of it popping up. Facebook has most recently come out with a formulation of their version of a Cryptocurrency. I have not personally talked to Facebook about what their plans are. I've read their white paper, not there. They have a full technical white paper, which I haven't read, but I've read their their broad white paper, and it contains some of the operational vision that I think, uh, it is possible for crypto currency. I mean, one of the things that excites me about it is that it's really a way to bring the world together so that people can collaborate from all across the world and get paid for their contributions to project in ways that they're actually, you know, it doesn't involve complicated currency transactions. Everyone could get paid with the same the same currency. So it's almost like the money to go along with the Internet. And I think that's where the potential value of crypto currency lives that you know there are other potential uses, but that's 11 value I see in it. And so Facebook. It's not surprising in some ways that they have thought, How can we take advantage of the user base that we have all over the world? It's not surprising to me that they're thinking about that kind of thing because they do have such global reach. But again, it's It's not something that I've that I've spoken with them about, and I will see what happens if they have conversations with with regulators, which I understand they're doing now. One point of contention of the hearing this morning was the way labors set up. It's a Swiss foundation, which I think some of the senators were hammering Marcus on saying, You know, what are you doing overseas? But I've also heard that the Americans have legal infrastructure, just isn't built for something like this. Switzerland. It is simply a better option, which raises the larger question. Is America's forfeiting some innovation to places like Switzerland or Asia? Or, you know, are these places just sort of, you know, running gun and bedding is Well, I think that's one of the worries that I have. I want to make sure that this country is the most open innovation of any of any country and one of the problems that you have when you have an established regulatory system that's been in place for a while that were pretty slow to move. And so, um, you know, we've got people at the SEC who are working intensely on these issues, and they're they're thinking about the proper approach. But as you can see with the way our guidance is sort of trickling out, it takes a really long time to make a decision, and it takes a really long time to issue anything. So we're not that nimble. Regulators just tend not to be nimble, were inherently conservative because we worry about something going wrong and someone coming back and blaming us when things go wrong. And, um and certainly I that that happens. And so so it's no surprise that people are conservative. That said, other regulators and other places have taken a different approach, and I think they're seeing innovators come to those places because they feel more comfortable there and they feel their certainty there. So one Yeah, I worry about the innovation leaving are leaving our shores, and I also worry about U. S investors being precluded from participating in those project because it's easier just to say we don't want any U. S. Investors just to avoid having any interaction with the regulators here as your lawyer, but also an economist would like to go to the real big picture stuff for a SEC. Wanted interest in this notion of new, non sovereign currencies out there. And there's also debated countries like Russian Shine are trying to get away from the U. S. Dollar because U. S. Dollars when the country's greatest assets let's borrow cheap. It's sort of a, you know, a strategically powerful thing. Tohave. Do you think blessing these sort of like non sovereign currencies could, you know, risk accelerating the move away from US dollars? Well, I should say, I'm not an economist. I'm a wannabe economist. I did. I did major in in college but don't have a PhD because I'm not good enough at math. But if I were an economist, I certainly would not be a macro economist. I would be a micro economist because I think micro is what matters. And so that's how I approach these crypto currency issues. I think the micro payment aspect, the fact that individuals can decide to interact with one another using a Cryptocurrency, is really powerful for individuals that they're able to control that Andi, It's the decentralized nature of how these projects work, I think is really interesting because it's a way for people to collaborate and be rewarded for their collaboration and their contributions. So I think it challenges a lot of notions that we have existing notions, um that we have about how lots of things work. And I think you know one of those things. If people can figure out a way that very efficient for them Thio contribute and be rewarded for their contributions, they're likely to gravitate toward it, you know? And I am free market. So I think people should be ableto decide what is most efficient for their transactions.