Hester Peirce not happy with SEC Crypto Regulatory effort

The Securities and Exchange Commission (SEC) announced on Thursday that enforcement action against cryptocurrency exchange operator Kraken will result in a $30 million enforcement action and the company will stop betting.

“Whether through stake-as-a-service, lending or other means, crypto-intermediaries, when offering investment contracts in exchange for investors’ tokens, must provide the proper disclosures and safeguards required by our securities laws,” said SEC Chairman Gary Gensler. “Today’s action should make clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection.”

While the SEC is portraying it as a win for investors, Commissioner Hester Peirce disagrees, believing the commission is not approaching crypto regulation the right way. She added that unregistered offerings and subsequent sales of those securities — one of the points of contention in the Kraken case — are not the main concerns the regulatory agency should focus on with crypto.

“Most concerning, however, is that our solution to a registration breach is to completely shut down a program that has served people well. The program will no longer be available in the US, and Kraken is required to always provide an effort service in the US, registered or not. A paternalistic and lazy regulator settles for a solution like the one in this settlement: don’t initiate a public process to develop a workable registration process that provides valuable information to investors, just drop it.” Peirce said in a statement.

To those in the exchange-traded fund industry, Peirce is a familiar name because she is one of the commissioners who has been vocal in supporting a bitcoin-backed ETF — a product that continues to elude U.S. market participants.

last June, she took the case with the SEC’s handling of spot bitcoin ETFs, saying the commission raised hurdles for such products to be approved.

“The Commission has added crypto-specific hurdles to what used to be fairly straightforward processes for approving these pooled investment vehicles — either exchange-traded funds (ETFs) under the Investment Company Act of 1940 (the 1940 Act) or commodity-based exchange-traded products (ETPs) under the Securities Act of 1933 (Securities Act). Although in the past eight months both ETFs and ETPs based on bitcoin futures have begun trading, the commission has continued to reject ETPs based on the spot bitcoin market,” she said.

As for the Kraken case, Peirce said it should serve as an impetus for more uniformity in SEC regulations for crypto.

“More transparency around crypto efforts programs like Krakens may well be a good thing. But whether we need a unified regulatory solution and whether that regulatory solution is best delivered by a regulator hostile to crypto, in the form of an enforcement, is less clear,” Peirce concluded.

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