Hester Peirce compares dealing with SEC on crypto to "an escape room"

08 Jul, 2019
by David Robb
Regulation
Hester Peirce compares dealing with SEC on crypto to an escape room

Securities and Exchanges Commission (SEC) member Hester Peirce has recently shared the body's latest discussions on crypto. She suggests that dealing with regulations could be compared to "an escape room".

Hester Peirce gained the affectionate nickname of 'Crypto Mom' from the crypto community, due to her friendly stance towards the space and her desire to reduce regulatory oversight in a way that would encourage innovation. 

The SEC's regularly delayed decisions on rule changes to allow a Bitcoin ETF have been criticised harshly by Peirce and many others, as this particular breakthrough has been seen as crucial for legitimizing the crypto market and enabling more institutional money to enter. However, the latest BTC rally has plausibly been explained as a result of established financial entities investing in the top crypto, so other channels do appear to have been found.

Custodial solutions are one important way for insitutions to gain exposure to crypto, as they allow firms and funds to invest without taking on extra security risks or needing any technical expertise. The latest SEC discussion has addressed broker-dealer custody, and the commission has now released the staff's joint statement.

A brief look at the statement shows the complexity involved with regulating crypto that led Peirce to bring up the escape room comparison. The commissioners explain that their decisions will need to take into account the Securities Investor Protection Act of 1970, the "Customer Protection Rule", and "Books and Records and Financial Reporting Rules".

Exactly how these apply to the custody of digital assets is an ongoing concern for the SEC, and the members claim that they "appreciate market participants’ ongoing engagement on these issues.  The Staffs encourage and support innovation and look forward to continuing our dialogue as market participants work toward developing methodologies for establishing possession or control over customers’ digital asset securities".

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