US Securities and Exchange Commission (SEC) Commissioner Hester Peirce says the crypto sector is “too small” as it is to impact the broader financial system.
In an interview with Bloomberg Surveillance on Thursday, the crypto-friendly SEC official also explained that regulators cannot decide on a regulatory approach just “based on price.” However, recent events have Washington definitely focused and this could potentially result in “some regulatory clarity.”
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Peirce also touched on the fact that regulators are somehow slow in taking aggressive action in the crypto sector, even as Bitcoin (BTC/USD) and other cryptocurrencies nurse losses of over 60% since November’s peak.
Almost a decade since Satoshi Nakamoto pioneered the revolutionary financial asset, regulatory clarity remains largely non-existence. The SEC commissioner says part of the reason is down to regulators trying to find the best way to fit crypto regulations into the “existing regulatory framework.”
An example is the bipartisan bill recently introduced in the US that looks to add more clarity to crypto regulation by stipulating what should be under the SEC and what falls under the purview of the Commodity Futures Trading Commission (CFTC).
Peirce acknowledges this a route regulators are considering, but Washington cannot fully escape blame for the tentativeness.
I think there’s also been in Washington a bit of a desire to see crypto just disappear. And I think people are realizing that that’s not likely to happen. So maybe that will help people to think about where regulation is appropriate. But as you said I mean you know we have to bear in mind that people should be free to engage in transactions when both sides are willing to engage in that transaction. And so there needs to be a good reason for a regulator to step in the middle of.”
Another key area the SEC commissioner commented on is whether financial innovation in the crypto sector is a threat to financial stability and the broader financial system. This, especially given the turmoil seen over the past few months – including the collapse of Terra’s stablecoin. The regulator doesn’t think crypto turbulence presents a risk.
I still think that crypto is quite small,” she explained, adding that although there have been “some problems in recent weeks…those have [not] flowed into the more traditional financial system.” According to her, whatever that’s happened are “reminders that if you do things in the crypto world like over-leverage or overexpose yourself to a particular counterparty, you can really get into trouble.”
The issues and problems can be painful, especially to investors, but its one lesson necessary if people have to learn while the crypto industry is still at this nascent stage.
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