In front of a packed room at New York’s Harvard Club, Hester Peirce, current SEC Commissioner and Crypto Task Force lead, shared her thoughts about markets, regulation, and cryptocurrencies.
Here are our notes:
Peirce starts off discussing private markets. She believes in fewer rules for private markets, so we can see if things are working before anyone enters public markets; in other words, give private markets more of a “canary in the coal mine” function.
She highlights a key drawback of public markets: exposure to shareholder lawsuits. This, she notes, is a major reason more companies are choosing to stay private and not go public. She also expresses support for litigation reform. Peirce is thinking about graduated regulation — rules would change as the company changes; not one set of rules that favor some and harm others.
Peirce emphasizes she believes in open competition and real failure for companies, to ensure the market remains healthy. She is also very mindful of skin in the game.
(It’s probably helpful to say here that Peirce seems extremely thoughtful and reasonable. We wouldn’t be surprised if people typically describe her views as “common sense” or fair-handed.)
Peirce says her job is to implement rules. (She says this in the context of commenting on how much her personal beliefs influence her regulatory work.)
Referring back to skin in the game, Peirce argues that management and boards shouldn’t be solely focused solely on maximizing shareholder value. Instead, she thinks they should have more skin in the game, which would naturally lead them to pursue other (socially beneficial) objectives beyond just increasing shareholder value.
From here, Peirce turns to cryptocurrencies.
Hester Peirce on Crypto
Lots of people at the SEC and Treasury are working on crypto, so fewer people worry about regulation.
Regulation by enforcement: Peirce emphasizes that the SEC is a regulatory agency with an enforcement arm, not the other way around. Regulations are made, then enforced — that’s how it’s supposed to work.
Peirce says she likes making rules in public, where everyone can weigh in. She encourages stakeholders to communicate with the SEC (via RFIs, stated officially here: https://www.sec.gov/newsroom/speeches-statements/peirce-statement-rfi-022125).
For the future, she is thinking about crypto tokens being sold via something similar to a securities transaction, not necessarily because they’re securities, but because this framework allows adequate disclosures to be made.
Peirce is also thinking about combining tokenization with crowdfunding.
Success, Peirce says, means clarity on what is in the SEC’s jurisdiction and what is not. She says people should not be afraid to make disclosures. Regulation by enforcement rewards people for being silent. She wants to reverse that.
Final Thoughts
Peirce spoke and answered questions for about an hour. She’s incredibly thoughtful and analytical, while being careful to consider the merits of many different viewpoints. Regarding crypto, Peirce seems focused on everyone getting (or giving) proper disclosures, so everyone is clear about what they’re getting involved in, but outside of that, she seems to want to let people do their own thing, so long as everyone follows the rules — no more, no less.
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