SEC's Peirce Calls for Rulemaking to Regulate Crypto Industry

Hester Peirce, a member of the US Securities and Exchange Commission (SEC), has proposed a more systematic approach to regulating the cryptocurrency industry. During her speech at the DC Blockchain Summit on March 26, Peirce, who leads the SEC’s crypto task force, suggested that the commission could achieve greater durability in digital asset regulations through rulemaking at the agency level and legislation in Congress. She contrasted this approach with the agency's recent guidance, such as a statement suggesting that memecoins do not qualify as securities.

Peirce expressed her hope that the industry would not be overly focused on the Howey test, a legal test used to determine whether certain transactions qualify as "investment contracts" and thus securities. She emphasized the need for clarity on what falls under the SEC's jurisdiction and how entities can proceed if they do. This call for rulemaking and legislative action is part of a broader effort to create a regulatory framework that can adapt and evolve with the rapidly changing crypto landscape.

Peirce's remarks come at a time when the SEC has been dropping several investigations or enforcement actions against major crypto firms, including Coinbase, Ripple, Kraken, and Immutable. Some observers see this shift in policy under acting chair Mark Uyeda as an attempt by the administration to drop cases against firms that supported its agenda. This change in approach has sparked discussions about the future of crypto regulation and the role of the SEC in overseeing the industry.

Since the start of the 119th session of Congress in January, lawmakers have indicated their intention to move forward with a market structure bill that would clarify the roles of the SEC and the Commodity Futures Trading Commission in regulating digital assets. This legislative effort is seen as a crucial step in providing a clear regulatory framework for the crypto industry. Additionally, the administration signed an executive order establishing a working group to explore a regulatory framework for stablecoins, further highlighting the government's commitment to addressing the regulatory challenges posed by cryptocurrencies.

Peirce's call for rulemaking and legislative action is a significant step towards establishing a more durable and effective regulatory framework for the crypto industry. As the SEC continues to engage with industry experts and stakeholders, it is likely that we will see further developments in the regulatory landscape for cryptocurrencies. The SEC's efforts to foster discussions and clarify its regulatory stance on cryptocurrencies are part of a broader trend towards greater regulatory clarity. Peirce's views reflect a shift away from what she and others have termed "regulation by enforcement" towards a more proactive and transparent regulatory approach.