January 24, 2022

Volume XII, Number 24

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January 21, 2022

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SEC Commissioner Peirce Weighs in on Crypto and More

In a wide-ranging interview at the Bloomberg Financial Innovation Summit, SEC Commissioner Hester Peirce asserted that (i) there is no need for a regulator focused solely on cryptocurrencies, and (ii) the regulatory structure eventually built around crypto must recognize the unique aspects of its underlying technology.

She offered the following views:

  • Cryptocurrencies. Ms. Peirce highlighted the need to have a regulatory framework that distinguishes between utility tokens and security tokens, and suggested her safe harbor proposal as a potential solution to this particular issue.

  • Bitcoin ETFs. Ms. Peirce urged the SEC to rethink its approach to "spot bitcoin exchange-traded products," stating that the standard that the SEC applies to such products is different than that applied to similar products. She noted that this distinction in application is likely rooted in the SEC's view that spot bitcoin markets do not have the same characteristics as securities markets with respect to investor protection. She pointed out that there are other ways that investors can be protected, including through self-regulation and arbitrage mechanisms.

  • Stablecoins. Ms. Peirce explained that while there is some sense to taking a prudential regulatory approach to stablecoins, stablecoin products vary and the regulatory approach taken should depend on the facts and circumstances of each product. In particular, Ms. Peirce highlighted the fact that there are potentially stablecoins that fit within the securities framework and that would have to be regulated accordingly.

  • Trade Settlement. Ms. Peirce thought that there was more room to shorten the trade settlement date from T+2. Additionally, she noted that this may be an area in which regulators could learn from the crypto markets, where settlement happens much more quickly.

  • Investor Education. Ms. Peirce said that the SEC should respond to issues such as "gamification" of trading with a heightened focus on investor education in particular, to ensure that investors know what they are doing and are educated about trading and the potential ramifications of such trading. She recommended that the SEC should review the accredited investor definition, so that more people can participate more broadly in the capital markets.

© Copyright 2022 Cadwalader, Wickersham & Taft LLPNational Law Review, Volume XI, Number 309
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About this Author

Steven Lofchie, Cadwalader, financial services regulation attorney, derivatives market lawyer
Partner

Steven Lofchie, a partner in the Financial Services Group, concentrates his practice in advising financial institutions on regulatory issues and on derivatives and other financial instruments. He is consistently recognized in the United States by Chambers USA, Legal 500, and IFLR 1000 in the areas of financial services regulation and derivatives. The Best Lawyers in America also selected Steven as one of the nation's leading lawyers in several areas including: Administrative/Regulatory, Derivatives and Futures, Securities/Capital Markets, and...

212 504 6700
Law Clerk

Sebastian Souchet is a law clerk in the Financial Services Group.

Sebastian earned his J.D., magna cum laude, from Fordham University School of Law, where he was a member of the Fordham Law Review, a Mary Daly Scholar, and was elected to the Order of the Coif. He earned his B.A., summa cum laude, from Adelphi University, where he graduated from the university’s Honors College.

212-504-6100
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