SEC Commissioner breaks with SEC, Gensler on crypto regulation

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

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

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The SEC action against Kraken, which was settled without admitting or denying wrongdoing, alleged that the exchange engaged in the unregistered offering and sale of securities through its crypto-lending platform. Peirce said that is not the main problem.

“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 Chairman Gary Gensler, Peirce took aim at what Coin base CEO Brian Armstrong described 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 to regulate,” Peirce wrote.

Genslers, 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 Justice Department or policymakers to clamp down on the crypto industry.

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

Peirce, who dissented on the act of coercion, indirectly contested the premises of this claim.

“Most troubling, however, is that our solution to failure to report violations is to completely shut down a program that has served people well,” she wrote. “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.”