A Conversation with U.S. Securities and Exchange Commissioner Hester Peirce | The Fintech Foundation

[Music] Commissioner, thank you so much for joining us. Hey KT Chris for being here. Thanks to the Pentecost of the SEC or my fellow commissioners. Excellent. So disclaimers now away maybe I I am really curious about your views particularly on on the round tables.

Um we've now had a series of them uh on all kinds of different topics uh ending with with Deepot. Uh what are your biggest policyoriented learnings or or or conclusions as you kind of wrap up the process? I mean it is early right. I need to let some of this percolate around a little bit. I need to go back and watch them all again.

Um but I think that initial takeaways we do really need to make progress on helping people understand what's within the regime and what's outside of the regime. That was the first round table really underscoring the importance of these these questions of what what's a security what's not a security that sounds basic but I I do think we can provide some clarity there. So I think that's one piece of it. Um you know I think from today's round table on DeFi it was a really nice wrap-up because it was a reminder of the problems that happen when you have lack of regulatory clarity. It actually stunts an industry and it stops it from developing in the way that it otherwise would.

Um and so at one level that really raises the stakes of the project here. It means that we have to um provide that clarity. But I think on the on the other side of that, what I what came through loud and clear today was if you give us the the basic parameters, we can figure out a lot of these issues. Um, and I think that that is encouraging, right? Regulators don't have to do everything.

In fact, there's there's real promise in this technology taking over a lot of the job of the regulators. And that's something that Chris, I know you've been thinking about and working on um for a long time because this was something that you saw very early on. Um and so I'm I'm really excited about the prospect of being able to say there are pieces of this technology that mean we can maybe peel back some of those regulatory layers. Um yeah, one of the really um interesting aspects about the round table and I I was very young. Can everyone hear us by the way?

Now orig [Music] I will do it this way. Wow. I'm actually asked to talk louder. Okay. Uh as I get over that.

So, you know, one of the really interesting things that I that I noticed um from the first round table when I uh participated and and and I'm curious to get your your your views in terms of how do you assess and collect all that information is that uh there were heterogeneous views like there are differences of opinions in which you had lots of different people and you kind of put them all together in a room to kind of hash out some of the the the more challenging areas of of law and and and policy. There's a lot of law uh uh uh that that the different participants had to tackle hours long. When you get all of those, you know, the uh the the crunching of the law, the crunching of the different views and the interpretations of the law, I mean, how does that feed into into policym? I mean, what what do you lean into when you're trying to figure out the the optimal regime that provides that clarity to the industry while while also protecting investors? Like, are there certain kinds of things that you were looking for when you were listening to the explanations given by a very sort of assorted different bunch of experts?

Yeah. I mean, I think the number one thing is tell us what the pain points are, right? tell us which pieces of securities law are getting in the way of you doing what you want to do. Um, the wonderful thing about the securities laws is that Congress did give us a lot of authority to exempt transactions, classes of transactions, types of entities from um the rules that that generally apply. And so if people come to me and they say, "Haster, XYZ is posing a problem.

we have um a workaround for this. Why don't you why don't you do it this way? We can go ahead and do that. And so I think the the the message for people is this isn't over and you should be coming in and telling us what you need. You know, what is what is the one thing that would be helpful for you to to see changed um so that you can move forward with something.

Um there are a lot of different issues and as you said, they're competing views on some of these things. I think the bottom line is people aren't going to be happy. we're not going to make everyone happy. Um, but I am very concerned about getting to a place that is neutral in terms of I don't want to be the one picking the winners and losers. And so trying to um have as a process that allows as many people to take advantage of exempted relief that we give out, for example, that I think is is something that is is top of mind um for me.

Well, and again, I I I I respected and appreciated uh really just again the assortment of of different personalities that that that you had to at least provide that reservoir of information for you to make those those uh tough decisions. uh when you think about uh just the overall um place of the roundts in in terms of the when you think about the the place of the roundts in in terms of uh the overall work of the crypto task force. I think that would also be I think pretty interesting for the uh audience to hear which is um uh when you you know when if you were to summarize the overall work of the task force um uh and the relationship to the roundts you know were the roundts uh were they designed to start a conversation? Were they designed to confirm the work that's already being done or is it something that's uh uh being done to sort of uh launch new work streets? Well, so I'm someone who really believes in um the dispersion of knowledge across society.

And so I like bringing together divergent viewpoints so that we can kind of talk about issues in a way that's interactive instead of people just coming in one by one and talking to me which I do also find valuable but I often find it to be um particularly valuable when people who really know an issue are having the conversation in front of me um because they they know better the questions to ask than I do. Um so that is is part of it. I mean, we we put out a lot of questions that people are providing written input to and that is also very important because they're very precise questions and people can answer those and and help us think through the precise issues. But I think the roundts have been helpful in um get getting to some of the areas where there isn't maybe unanimous um thought and other areas where everyone does agree. That's also quite helpful to see people coming from different perspectives but agreeing on particular issues.

So you had mentioned uh exemptive authority which is which is certainly uh a major tool in the SEC's toolbox particularly when when trying to tackle new kinds of uh uh challenges and and certainly when addressing frictions. Um are are there uh what are the other sort of uh tools in the toolbox that you're you're you're thinking about uh looking forward? Certainly we've had guidance um uh at different times from from the SEC. We've had uh you know the prospect of some exemptive relief. Uh we have the prospect of different rulemakings.

Um what what to the extent to which you have an idea because as you mentioned you just finished your last round table an hour ago. uh you know but but maybe you can have give us a little bit more flavor as to maybe the the the different kinds of tools in the toolbox that you may be leaning on may fail. I rule making is clearly a tool in our toolbox and that will be helpful in making some of these definitional um changes uh or or statements have more staying power. Uh, and then a a rulem also could be an opportunity for us to build a safe harbor of the kind that I suggested several years ago where at least it it gives people the ability to move forward um on doing token launches in a way that meets a non-exclusive safe harbor. That might be an area where a rulem would be helpful.

We have used staff guidance, I think, in some areas just to say we see this activity happening. We want you to know that we don't think that this activity is within our space and that's helpful um for I think clearing out some of the the issues so people know we're not going to be spending time on those things. Um it is interesting to see the reaction when we put out some of these statements saying this stuff's not in our our territory. A lot of people get really angry and they say well there's a lot of bad conduct happening there. Why isn't the SEC um stepping in?

And I think this this is an important moment for us to remember that Congress actually gave us a jurisdiction and we're not even allowed to do things outside of that jurisdiction. And so I think telling people that hey we don't regulate staking to me I mean I I would hope that comes as a relief to some people but I I think it's also you know really important for us to acknowledge that we have limits on our jurisdiction. So uh uh I'm I'm sure I'm sure you're you're aware there are there are other things happening in town uh particularly in in Congress uh and in this area of of of currencies. Uh to what extent does do developments in Congress and the debates and the movement or non-movement of bills affect the work of the of the SEC? So, we're certainly talking with um folks in Congress about legislation.

I think that's they want to hear from us how they, you know, if if we look at what they're doing, what what they we think the effects will be. Um but I think a lot of what we can do is already within our our uh authority to do. And so where we can work with our existing authority, we can do that. or or you know looking toward what they're doing and not trying to do anything that would contravene what they're uh what they're trying to do but I think they're complimentary efforts. So g given this this particular audience I mean you have thought leaders you have uh uh some regulators in here from other kinds of agencies you have um people who are obviously very interested um fintech and crypto uh uh specialists.

any when you look forward um any advice as to sort of given well I guess to break down what what do you perceive as your your next immediate steps now that you've wrapped up the round table and then how do you envision what engagement should look like for the SEC I mean as concrete as you can be is helpful um it also is important to remember that we have limited staff and so we're not going to get everything done as quickly as you all want um but but the The more help you can give us in thinking through the legal and the technical issues, the better it is. If you think there are people that would be really valuable for us to talk to, you should let us know. Um, but I think it is really do your homework um so that we can act faster. Uh, that would be my my first message. And and the I guess the second piece of this I would say is it's really important to do this right now because I don't want to end up in a world where we create a regulatory regime that works really well for some very large players and and prevents um uh what one of our panelists today called the tinkerers the garage tinkerers from being able to experiment and try new things.

Um, so the decisions that we make now matter a lot and I also would urge you that that means don't compromise things that are really important. Um, I think there can be a tendency to say okay we'll we'll do it however you want to do however you want us to do it government just so that we can move forward. But if that's not actually going to get us to a good place then we shouldn't do it. You have to care about the stuff that really matters for the long term. professor, thank you so much for telling to do their homework that I've said that more than once.

Uh uh uh and and uh and again also thank you so very much for your time. So let's give a hand to Thank you. [Music]