An SEC Commissioner believes the agency isn’t doing enough to work with cryptocurrency firms in establishing regulations that they can comply with.
“I think it’s safe to assume that crypto is going to grow in size,” Peirce told The Wall Street Journal. “And so what we can do now to invest in building a reasonable framework, I think, will pay off down the line.”
Disadvantaged smaller firms
Peirce made a point highlighting the bias that smaller firms would face if broadly regulated the same as established financial firms. Incidentally, this point also illuminates why the SEC should take a more active role to collaborate with crypto firms. For startups, the process of complying with SEC rules would be “tremendously hard,” Peirce emphasized.
According to Peirce, most of the firms the SEC supervises have an established relationship with the regulator, being established financial entities themselves. Typically, when these firms want to introduce a new product or services, they have the financial capacity to wait through the lengthy regulatory process, she said. Unfortunately, dependent on fundraising which is eventually exhausted, entities just entering the market cannot afford to wait through such processes.
Additionally, legacy firms also benefit from these established relationships by being able to approach the SEC to craft a viable framework. “We obviously aren’t the one giving legal advice, but people come in and talk to us, and run ideas by us, and they try to work with us to craft a framework that will work for a particular product or service,” Peirce related.
However, she believes that the difficulty posed by this convoluted process also intimidates smaller firms. “I think a lot of people are avoiding trying to build things in the SEC space precisely because it’s so difficult to navigate that,” Peirce said. This echos previous criticism of hers regarding the SEC’s refusal to provide clearer guidance for crypto firms.
SEC approves Bitcoin ETF
Despite Peirce’s criticism, the SEC has taken steps in recent days to further integrate cryptocurrencies into regulated markets. Last week, it approved the first exchange-traded fund (ETF) based on Bitcoin futures, which were introduced at the beginning of the week. More are poised to be approved shortly.
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