SEC Commissioner Discusses Classification of Cryptocurrencies


A commissioner for the Securities Exchange Commission gave her thoughts on the asset classification of cryptocurrencies and ICOs at a conference on May 2nd.

Speaking at the Medici Conference in Los Angeles, Commissioner Hester M. Peirce told the audience that she wants to avoid a sandbox regulatory approach for the cryptocurrency markets.  She maintained an overall focus on the ICO market but did mention specific cryptocurrencies like Bitcoin.  

Her overall tone was positive and well balanced when it came to regulation.  She cleverly used the analogy of a lifeguard at a beach watching over the swimmers to explain her stance on regulating ICOs and cryptocurrencies: 

“On a beach, the lifeguard watches over what is happening, but she is not sitting with sandcastle builders monitoring their every design decision. From her perch on the lifeguard stand, she can spot dangerous activity and intervene with a blow of the whistle or, if necessary, a direct intervention. She always stands ready to answer questions about the rules of the beach. She puts up the red flag to warn of dangerous riptides or sharks.”

This tone was upheld throughout the whole speech, and she made it clear that she wants to better understand the markets and the technology to help her make more informed decisions.  

SEC Chairman, Jay Clayton, recently stated that, “I believe every ICO I've seen is a security."  Commissioner Peirce notably disagreed with Chairman Clayton’s remarks, saying that regulators ought to “evaluate the facts and circumstances of each offering” and that she is “wary of any blanket designations for all ICOs.”

On Bitcoin and similar unnamed currencies, she said that “They may be currency, commodities, or something else, but it is unlikely that, on their own, they’re actually securities.”

She ended her speech on an optimistic note about the SEC collaborating with innovators in the industry.

“My hope is that we can navigate these new waters collaboratively. The SEC’s role is not to hand out permission slips for innovation. Innovation happens—organically through private decisions and irrepressible human creativity. We at the Commission have a role to play in protecting investors and market integrity by deterring and punishing fraud and setting clear rules. As we sit atop our lifeguard’s stand and survey the beach, however, let’s not lose sight of the benefits new technology can provide in the area of capital formation, market efficiency, economic growth, and overall societal well-being.”

It is important to note that Commissioner Peirce stated that these are her own personal views, and not necessarily those of the SEC or of her fellow Commissioners.