The U.S. Securities and Exchange Commission (SEC) regularly draws the ire of crypto proponents who are frustrated at its failure to support innovation and entrepreneurship. Despite this, some have warmed to the agency’s opinionated commissioner Hester Peirce, who has adopted the moniker of “Crypto Mom.” At a compliance conference this week, Peirce spoke positively about crypto assets, expressing the belief that they could one day become “the money of the internet.”
The Digital Asset Compliance and Market Integrity Summit isn’t the sort of event where crypto bros go to exchange fist bumps and shill token sales. With so many compliance professionals in the house, plus the SEC Commissioner herself, all talk of market manipulation is firmly geared around combatting, not abetting it. Despite the serious nature of the inaugural event, organized by SaaS transaction monitoring firm Solidus Labs, there were some lighter moments.
“I got a card for Mother’s Day saying ‘Happy Mother’s Day Crypto Mom,’” confessed Hester Peirce after taking the stage to deliver her keynote on Thursday, “and I couldn’t be happier.” Like SEC chair Jay Clayton, Peirce has earned a reputation for even-handedness: she won’t turn a blind eye to the worst excesses of the crypto space, but nor is she trying to stifle legitimate business.
Aside from her comment about digital assets having the potential to become “the money of the internet,” Peirce used the phrase “transaction mechanisms” to describe the way she sees cryptocurrencies operating. She was also frank about the failures of the SEC in the past, conceding “When I came to the SEC, one of my hopes was to help change the way it addresses innovation … I saw it was slow.”
The SEC’s fiscal year draws to an end on September 30, and some analysts believe the agency may finish with a flourish by taking action against fraudulent crypto projects. In his Money Stuff column on September 25, Matt Levine cited the SEC charging the founder of Fantasy Market, “a purported online adult entertainment marketplace, with orchestrating a fraudulent initial coin offering (ICO).”
As the SEC’s complaint explains, the founder “claimed that Fantasy Market would allow participants to control live adult entertainment performances by paying for specific requested activities with the Fantasy Market digital token.” There were also repeated claims of profiting from buying tokens in the project’s whitepaper, which is a surefire way to get the SEC’s spidey sense tingling. With Kik closing down its messaging app due to an SEC lawsuit, the agency has issued a warning shot that it is still closely monitoring the crypto space.
There’s nothing to suggest that the SEC’s view on token sales – whatever acronym they may assume – will be softened any time soon. U.S investors can trade utility tokens on regulated exchanges, but they can’t purchase them via a token sale in most cases. When quizzed at Thursday’s New York summit on whether the U.S. risks being left behind to countries that are more receptive to crypto, Peirce admitted this presented a threat. Emphasizing the need for the SEC to strike a balance when regulating crypto businesses, she said:
If you want a government that’s more forward-thinking on innovation, that means that if something goes wrong, you can’t go running back to the government and say ‘Hey, you didn’t protect me from myself!’ … I think we need to be a little less paternalistic.
Hester Peirce earned warm applause at the Digital Asset Compliance and Market Integrity Summit, but she’ll have her work cut out in winning over hardline SEC skeptics. “Maybe this will be the year that the SEC stops going after the “low hanging fruit” and actual nails one of the literally thousands of frauds in this godless industry,” tweeted crypto analyst Nic Carter.
Solidus Labs and its partners have expressed the desire to build upon Thursday’s summit, with the goal of promoting better industry standards through voluntary cooperation between crypto exchanges and other ecosystem participants. Should that lofty vision be achieved, the SEC’s enforcement division might be able to direct the bulk of its energies elsewhere next year. For now, though, it looks like there’s still some low hanging fruit to be purged.