Leading U.S. Regulator Exposes Disunity In U.S. Crypto Strategy, Warns Of Innovation-Stifling Rules

Leading U.S. Regulator Exposes Disunity In U.S. Crypto Strategy, Warns Of Innovation-Stifling Rules

Topline

A Trump-appointed financial regulator said she opposes efforts by her colleagues to impose stricter rules on cryptocurrencies and retail stock trading platforms for fear of stifling innovation, highlighting disunity among leaders of America’s top financial watchdogs as they decide if, and how, to manage the volatile crypto market as it continues to move into the mainstream.

Key Facts

Hester Peirce, one of five commissioners at the Securities and Exchange Commission, told the Financial Times she did not believe the gut instinct to regulate crypto markets in the same way as existing assets will be “great for innovation.”

Peirce said “pretty effective self-regulation” is possible for the type of peer-to-peer transactions characterizing cryptocurrencies and could stand in for government regulation.

Peirce’s comments highlight disagreement among and within America’s leading financial regulators over how best to manage crypto assets, and conflicts with calls for more thorough regulation from the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation and the chair of the SEC, Gary Gensler.

Gensler recently told a House committee there was a potential need for dedicated legislation governing crypto exchanges, particularly to manage money laundering and illicit activities.

Peirce’s stance also puts her in conflict with former President Donald Trump, who appointed her as commissioner, who recently called for very strict regulation and described Bitcoin as a “scam.”

Peirce also offered countervailing thoughts to the criticism that retail trading platforms like Robinhood gamify trading to keep customers engaged, suggesting it is “not necessarily a bad thing” to make the platforms “look like the other platforms in people’s lives.”

Crucial Quote

Peirce said the SEC could learn a lot from games in getting its messages to consumers across. “We need to gamify our communications with investors,” she said. “We need to meet them where they are.”

Key Background

The novel challenges of cryptocurrencies, alongside highly volatile markets, high risks of financial crime and rapid growth into the mainstream, make it a prime target for financial regulators around the world. As the division within the SEC highlights, trade offs are often framed as being between encouraging innovation and investment or implementing stringent regulatory safeguards. China cracked down on financial institutions trading in digital assets in May, contributing towards a market contraction of nearly 30%.

Surprising Fact

El Salvador became the first country in the world to formally adopt Bitcoin as legal tender Wednesday, President Nayib Bukele said. In 90 days, the digital asset will have to be accepted by businesses for goods and services alongside the U.S. dollar.

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