She then explained that she initially worried that rushed regulation would impair the industry’s growth, but that those fears did not materialize.
“Enforcement actions we have taken to date in the crypto space have – for the most part – exhibited appropriate restraint,” Peirce said.
Instead, the opposite happened.
“It is not the SEC’s overzealous action that has stifled the crypto industry, but its unwillingness to take meaningful action at all,” she said.
Commissioner Peirce did praise the SEC for its eagerness to engage with startups, commending the establishment of FinHub “to provide a common contact point and center of organization for all things financial technology at the SEC”.
Nonetheless, she went on to say that she views the SEC’s other efforts in the cryptoassets area as “more of a mixed bag”.
She pointed specifically to the SEC’s recently released framework for classifying cryptoassets, under which “most of the ICOs we’ve seen would clearly be securities at issuance under this guidance,” according to Coinlaw expert and Chief Strategy Advisor to Security Token Academy, Professor Stephen McKeon.
Critical of the framework, Peirce said that it “could raise more questions and concerns than it answers” and lacked clarity on a number of questions crucial for both investors and brokers involved in securities trade.
“How can they satisfy the custody rules if the thing being custodied [sic] is a digital security? How can auditors fulfill their obligations in connection with digital securities? If a broker is selling a digital security, how can the broker prove that it has control over the security such that no one else can sell the same asset? May a broker-dealer’s business include a mix of digital assets, only some of which are securities? If a platform wants to allow trading in digital assets, what are its obligations? Is it permitted to trade both securities and non-securities?” Peirce asked in her speech.
“On these points, the SEC has been nearly silent. This silence may ultimately be deadly,” she added.
The commissioner than compared SEC’s approach to token markers with famed abstract expressionist painter Jackson Pollock’s technique of splashing paint on a canvas.
“Our Jackson Pollock approach to splashing lots of factors on the canvas without any clear message leaves something to be desired, so we still have work to do in clarifying what factors are the most important in making that determination,” she said.