In her seven months in office, Securities and Exchange Commissioner Hester Peirce has established herself as the voice of innovation for the cryptocurrency market.
In July, Peirce surprisingly dissented from the SEC’s decision to deny Cameron and Tyler Winklevoss an application for a bitcoin-backed exchange-traded fund. Citing a risk of being left behind, Peirce said the decision sends a “strong signal that innovation is unwelcome in our markets.”
A lawyer by trade, Peirce earned her J.D. from Yale University, graduating in 1997. Prior to assuming her position at the SEC, Peirce was a research fellow and the director of the Financial Markets Working Group at George Mason University.
In an edited interview with MarketWatch, Peirce spoke on her time to date at the SEC. She shed some light on where the cryptocurrency industry might be headed and the tough job regulators have in presiding over the ever-changing industry.
On her dissent in the Winklevoss ETF decision
The issue I had in the dissent was that I think we applied our standard of review incorrectly to look below the market that’s actually trading the product… as opposed to the plan that the market that actually wants to lift the product has, or trading the product.
The concern that I have is that we need to make sure that we’re not taking the position that a market—whatever the underlying asset is—that the market has to be perfectly mature and perfectly regulated and perfectly within our control before we’re willing to sign off on an exchange-traded product that’s based on that asset.
On balancing innovation with regulation
The concern that I came to the Commission with …is that generally, we’re not great with respect to innovation as an agency.
It’s not surprising to me because regulators tend to get blamed when something goes wrong, say if we approve something and it goes wrong, people come back and say well, you shouldn’t have approved it. If things go great, no one comes to us and pats us on the back and says, oh great job, glad you approved that.
‘And you can never measure the loss to investors and to the economy of us not approving things, so it’s really a lot easier for regulators to say no, no, no. And so when I came to the commission that was one of the concerns that I had’
When asked if the SEC behind the curve
I mean I do think we’re behind the curve, but I think almost everyone is behind the curve… things change so fast. So I think that we have work to do. But I think we have some really good people here as well.
But yeah, I mean I’m certainly worried. I’m certainly worried every time I hear someone say the U.S. is too slow and I’m going to go overseas to do my innovation, that’s always a bad thing to hear… I think investors are losing out, and I think the economy as a whole is losing out when we lose innovative efforts to other places solely because of our regulatory environment, that’s never a thing I want to hear.
When asked if we’re closer to a bitcoin-backed ETF
Well, I mean, you can see that I’m trying to convince my colleagues.
I will emphasize that each one of these listings that we consider, we consider on its unique facts and circumstances. So it’s a little bit hard to answer that question generally, but my goal is to convince my colleagues that we should have an open mind towards these products.
On keeping on top of the market
I try to talk to as many people as I can. In this space I really have been a bit disappointed because as you know from covering it, it’s a very complicated space and you can say “cryptocurrencies” and you’re lumping a bunch of things into one term. You say “blockchain” and you’re covering even more types of things.
So it’s an area that I really feel that I need to learn more about, and I’m hoping people will come and educate me about it. It really is helpful for me as I’m trying to think about what the right regulatory approach is in this area. So you know I try to listen to as many podcasts as I can about the topic, I try to read as much as I can, and talk to as many people who are willing to talk to me.