The Wolf Of All Streets - Why “Crypto Mom” Fights For Bitcoin | Hester Peirce, SEC Commissioner

Episode Date: December 16, 2021

Regulators in the United States get a justifiably bad rap for their handling of crypto, seemingly unable to offer clarity to both companies and individuals that are innovating and investing. SEC Commissioner Hester Peirce is an exception to the rule and is a fierce advocate for the crypto space that has been fighting for sensible regulation. Her mission is to protect consumers, while concurrently allowing entrepreneurs to innovate with minimal friction. She is more than just our “crypto mom.” She is leading the charge for financial freedom, opportunity, and access. -- Arculus: Arculus is the new crypto cold storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Store, swap, and send your crypto all with a simple tap of your Arculus Key™ card. Order the safer, simpler, smarter crypto cold storage solution today at: https://thewolfofallstreets.link/arculus -- Kava: Kava connects the world's largest cryptocurrencies, ecosystems and financial applications on DeFi’s most trusted, scalable and secure earning platform. Kava lets you mint stablecoins, lend, borrow, earn and swap safely and efficiently across the world’s biggest crypto assets. To learn more visit https://thewolfofallstreets.link/kava -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This podcast is sponsored by Kava and Arculus. Stay tuned for more information about both of them later in this episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where two times every week I talk to your favorite personalities from the worlds of Bitcoin, finance, music, art, sports, politics, basically anyone with a good story to tell. Now, one of the most compelling topics in the crypto space over the last few years has been regulation. A lot of companies

and individuals are seeking clarity, wondering what they can and cannot do, especially in the United States. Well, luckily, today's guest is the perfect person to give us some clarity on what is happening with the state of regulation. I am very honored to have SEC Commissioner Hester Peirce with us today. Thank you so much for joining. Scott, it's great to be here. I thought you were going to bill me as being from the sports world since I'm from the SEC, but I'm actually from the Securities and Exchange Commission, which means I have to give my disclaimer, which is that my views are my own views, not necessarily those of the SEC

or my fellow commissioners. I grew up in Gainesville, Florida. I'm a huge Gator fan. So to me, I always default to the sports definition of SEC as well. So I'm glad that you clarified that for us. So listen, how many, how often do people call you Hester Pierce? Every day. Does it bother you or are you just used to it?

I'm used to it. I, I, I correct them sometimes, but not all the time. Yeah, I would imagine that you don't always have to. So listen, I think at a basic level, probably most people don't understand the structure of the SEC, what it is and what the main task is. So if you could even just give us a bit of a brief background, that would be great. It can be pretty confusing because the SEC is one of many financial regulators in the United States. It's a federal regulator that regulates the capital markets. We're not the only federal capital markets regulator.

There's also the Commodity Futures Trading Commission. But we regulate stock exchanges, broker-dealers, investment advisors, public company disclosures. So that's kind of where our core of our work is. It's a commission structure, which means that there are five of us. One of them is chairman. That's not me. That's Chairman Gary Gensler. So we make the decisions in terms of if we're going to put out a new rule, we vote on that new rule. If we're going to bring an enforcement action, we vote on that enforcement action. But we have a staff of forty five hundred or so people spread across the United States. And so so that's kind of the core of what we do.

Our mission is officially protecting investors, as you might expect, facilitating capital formation, and then fostering market integrity. That makes perfect sense. Obviously, everybody in the cryptocurrency space is well aware of Gary Gensler. I think there was quite a bit of hope, actually, when he became chairman because he had taught blockchain at MIT and seemed to be someone who gets it. As chairman, does his opinion hold more sway than other members of the commission? Or is it just basically he who

interfaces with the other government agencies? What exactly does being chairman of the SEC mean? Yeah, I mean, that's a good question. I think it's different at different agencies, but at the SEC, Chair Gensler sets the agenda and he manages the staff. So in that role, he has quite a bit of power over the direction that the agency takes. And so that's why people look to him to say, okay, what's the tone going to be on crypto? It is certainly relevant that he's chairman. Dare I ask, what is the tone going to be on crypto? Well, I'm still hopeful, but I will say that, as you mentioned,

Chair Gensler came from MIT. And so that, I think, is a net positive in the sense that he was in a community of people who were developing crypto projects. So he understands the potential for the technology. And I think that is evident from some of the comments that he's made publicly. On the other hand, of late, he's been taking quite a strict tone, I would say. And in a broad, he has an expansive view on where the securities laws interact with crypto. And he's also made that pretty clear publicly. He's called on folks to come in and

register their entities to the extent that they deal with crypto because he sees so much of crypto assets as being securities. And so we're at an interesting time now, right? He's one of many regulators who are looking at the crypto space and saying, well, wait a minute, how can my agency play a role in regulating this? So I would love to have seen him come in and embrace the safe harbor that I proposed or embrace just the need for more clarity around where the securities laws apply. That's not been the approach he's taken so far. Yeah, it's interesting. I think a lot of people in this space at this point would probably even take a bit of negative clarity over no clarity at all so that they know what framework they're actually operating in. And I think that's been wildly problematic in general.

I hear that all the time, actually. I hear people say, you know what, I don't care what the rules are. I'm sure they care to some degree, but just tell us what they are so that we can figure out how to operate within them. Right, because we've actually seen retroactive punishment for behaviors of the past that weren't necessarily against regulation at the time that they were performed, right? I know that you were a pretty outspoken critic against the fine that was levied on Polonius for something very similar. Yeah, and what I'd like to see is, given that we see that, that we're looking back to 2017, for example, the ICO phase. Well, if we see things now that we think are not consistent with the securities laws, let's spell it out very clearly so that people can stop the conduct or bring it into compliance with the securities laws, if that's possible under the laws as they're written now, rather than sort of surprise them down the road with an enforcement action.

Yeah, it makes sense. You touched on your safe harbor proposal, which I think is very compelling and shockingly logical, right? I can't even see how it could be debated. But can you talk about what the safe harbor proposal is and what it would mean? So the safe harbor proposal is intended to sort of address this problem of information asymmetry that really has my colleagues concerned. And I understand why. So when people do a token offering, when they sell tokens, the people selling the token know what

the project is. They know what the plans are for the project. They know what the token economics are. So why not address that issue and ask them to make disclosures of those kinds of things so that people buying the tokens can understand what they're buying. That would be backed up by the anti-fraud laws under the securities laws. But you wouldn't be subject to all of the securities laws. The idea is that you can't really do a token distribution event in the way that you would want to do it for practical reasons, for building the network to include lots of participants. It's very hard to do that under the securities laws. So you would comply with these disclosure requirements. Then after a three-year period, you would sort of

reassess where you are. And if the network is decentralized, that means there's no more information asymmetry. There's no one person in the network who has all of the information, but it's spread out across the network. There are a lot of participants in the network. At that point, you're out of the safe harbor and you're out of the securities law context altogether. Or if you are not in that point, you're out of the safe harbor and you're out of the securities law context altogether. Or if you are not in that place, then you could work on registering the securities. And that would obviously not be the end result most folks would want going into that, but it would allow this time for the network economy and network effects to build out.

Yeah, I mean, it seems so obvious with such a new technology and people, basically, it's fly by night, right? I mean, people are taking it as it comes and trying to innovate. And anytime you have innovation, things are going to change. So giving people three years to say, listen, we're going to prove we're not a security. And if we are, then we'll figure it out and register seems to make a lot of sense. And we've seen, obviously, Chairman Gensler say, come in, register, you touched on it before, talk to us, work with us. But the most glaring example we have of that is Coinbase coming to the SEC saying we would like to do a lend product,

4% yield. There's 10%, 12% yield products, obviously, on the market already. And not only being told, no, you can't do that, but being threatened with litigation as a result, right? With no clarity on why that would happen. So why would a company seeing that be compelled to come in, disclose everything with the fear of a threat of litigation. Well, and I don't want to speak to any particular company or particular project, but I will say that's a theme that I hear consistently, which is, yeah, we hear you say come in, and I say that too all the time, come in and talk to us. But we're not seeing the end results coming out of that of exemptive relief, which means when the securities laws were designed, they were designed with this idea that, yeah, things would change. And so let's give the SEC, Congress gave the SEC power to give exemptions to people so that new things could work under the framework. And so people are not seeing us come up with these flexible solutions to achieving the objectives of the security laws, but doing so in a way that's consistent with

the technology and with what people are trying to build. And so I think until we have some examples of saying, no, you can actually come in and talk to us, you can come out the other end, we can see our objectives met, and you can see your business purpose met as well. I think it's not going to be as likely that people will come in. So I'm still hoping that we can get to the point where we have public conversations about what exactly the problems are, where crypto is running into the securities laws and it's not working, and what potential solutions are to adjusting our rules so that everyone's objectives can be that. Yeah. I mean, it's very hard, obviously, for government legislations to come up with a framework

around a new technology. So I do think people need to understand that, right? I think there is an expectation in the crypto community that you guys should just get it and understand and be able to create this framework. But that framework is going to exist and effectively till the end of time, it seems that the way that things work. So I get that it needs to be done right. So that said, is using the Howey test from the 1930s the correct way to determine a regulatory framework for a technology developed in this century? The Howey test was a Supreme Court case, and that Supreme Court case defined what one aspect of the definition of security under the securities laws is, and that's investment contract. And so essentially what Howey says is if you invest money with the expectation of profit based solely on the efforts of someone else, that is probably, that's a security, that's an investment contract, which means.

And so that's what's been applied to a lot of these. So that, you know, is that test the right for all kinds of things? I've argued it may, we may need to really think about whether we've too broadly applied it over the years. And crypto is one aspect of that. But again, I think we don't need any special rules or any adjustments specifically for crypto. But I've really changed my mind on that based on talking to a lot of people. And so I think we do need to have some sort of a rethink, some sort of a framework that is as technology neutral as possible, but does acknowledge that there's something different here. Right. And that's not even unique to crypto, right? I think we all agree that the world is going digital and that technology is proliferating. So I don't think

that that's just something reasonable for the cryptocurrency space to ask for, but probably going to be something that's necessary pushing forward regardless, right? Some sort of new rules for new technology and financial instruments. I think that that's just necessary. But you just talked about how we test to find an investment contract, which has the expectation of financial gain, but we've also heard that stable coins could be deemed securities. You obviously do not buy a stable coin, I would've also heard that stable coins could be deemed securities. You obviously do not buy a stable coin, I would think, knowing that it's pegged to the dollar with the expectation of profit. So that's a fair question. And I think this is where securities law is always fun,

right? So there's the investment contract part of the definition of security, but there are also many other, if you read the definition, there are many other things in that definition. And so a stable point could potentially fall within one of those other categories, or it could, depending on how it's designed, look like a money market fund. So again, facts and circumstances are really important. Lawyers are always hammering on that facts and circumstances matter. It really does under the securities laws, you have to kind of know the whole picture. And I think that's one unfortunate thing about the way, you know, sometimes we talk about crypto as if it's one thing, but there are a lot of different elements of the crypto discussion and stable coins is one

unique, unique area. And even within that, there's variation. Right. So to your point, some stablecoins are likely securities, but not all stablecoins are likely securities. And so I guess there's some nuance there that probably gets lost. So that's great clarification. Yeah. And I think you also see that there are a lot of regulators who think they might have

an interest in regulating stable coins. So, you know, that discussion is happening in Washington with banking regulators saying, wait, we want this. And, you know, maybe the Consumer Financial Protection Bureau wants a piece of it. Maybe the CFTC wants part of it. Maybe the SEC wants part of it. So there's no dearth of regulators trying to get into the game here. Isn't that a bit scary, right? That every agency wants sort of their piece and their say in how these things are regulated. I mean, to me, that sort of speaks to the dangers to some degree of having so many regulatory agencies without clarity, right? How do we know who's going to do it and why are all of them so interested in

being a part of that? Well, the complicated financial regulatory landscape has been a challenge for lots of people. And I think crypto is the latest group of people experiencing the difficulties there. That said, in some ways, that fragmented regulatory landscape has allowed for a little bit of innovation by some regulators, you know, some maybe more forward thinking than others. And that can be good. It can be helpful. But it also can be very costly for people trying to deal with that. And why does everyone want a piece of, yeah, why does everyone want a piece of the crypto landscape? I mean, I think because some of them, because they realize there's a lot of promise there and it's going to be a big part of our society in the future.

And I think others, it's because they're pretty bought into narratives about all the bad things that can come out of crypto. So I think it's a little bit of a mix. I think there's just some general fear in there as well. And then there's, understandably, there's been so much growth in this space. So it's understandable that regulators are going to be thinking, wait, not only do we have to think about what's going on now, but we've got to think about down the road, are there any potential implications for the rest of the financial system? You mentioned that people have sort of this stigma that Bitcoin is dangerous.

It's for criminals, obviously, the energy argument, sort of the same recycled negative stories that happen seemingly every time the price of Bitcoin drops, but they come back cyclically. Why do you think that so many people still believe those things, especially in government, when largely they've been sort of diminished or proven wrong? Do you think it's just a matter of time and they'll come around? Or do you think that there's something behind that? I mean, I think there are many reasons for that. One is people in Washington, regulators have trouble really appreciating the potential value of something new.

Something new coming in is a challenge for the way that we've done things for a long time. It means that we have to rethink things. That's hard. And so we tend to sort of, because we're regulatory by nature, we tend to think of the negatives before we see the positives. And, you know, I guess there's a healthy part of that, right? Regulators should be skeptical. I think everyone should be skeptical about everything. People need to ask lots of questions. But what's frustrated me is that I think some of the negative discussion around crypto has been pretty superficial. And I think people really do need to

take a deeper dive to say, okay, yeah, there's definitely some fraud going on here. There's definitely a group of people who are just in this to make money really fast. And they think it's kind of fun that they can buy these altcoins and hope that they'll go up. But there is a lot of other interesting stuff going on in the space. And there is a lot of potential for really society transformational things coming out of it. And so I wish that that discussion were a bit more balanced. But this is the problem with regulators and innovation generally, right? It's safer and more comfortable for us just to say no than it is to say yes. And that's been a constant concern of mine because it really does mean that we're just not as nimble as we need to be. And my best friend is the state attorney in

Hillsborough County and used to be a prosecutor for the DOJ. And he focused on healthcare for the last few years that he was there. And I can say that what I saw him prosecuting in the healthcare industry, which nobody has a negative stigma about, was far more gratuitous than anything we've actually seen in the crypto space. So it just seems like maybe it's because we're newer, obviously, but that it's sort of an unfair rap to some degree. But maybe with time. I mean, you have to remember too that as, as the SEC, for example, so every week we're looking at new cases and the type of fraud that people will perpetrate is really pretty remarkable in the sense of, you know, how can people sink to this level? And so when you see that time and again,

you see people taking advantage of other people, it does make you a little jaded and makes you say, is there anyone out there who's just trying to provide a product or service that someone else wants and doing it on honest terms? And so I think it's important for us too to take a step back and realize, no, there are a lot of people out there who are just trying to build interesting

new things that will make other people's lives better. And so it is important for people in the crypto world to be telling those stories. I mean, I think another problem that I, that I see is that a lot of the first use cases for crypto are going to be outside of the United States. They're going to be in societies with less developed financial systems, with less developed economies. And so we tend to be very insular in the United States, inward focused, and we don't see as

much of that or appreciate as much of that and can even be pretty dismissive of it. So I think, you know, over time, as more and more use cases appear here in the US, I think maybe regulators will change their tune a little bit. But we have to allow the innovation to happen. That's what I'm concerned we're not going to do. You obviously want to let the innovation happen. We have affectionately deemed you crypto mom, right? So I think that we know where you stand. Obviously, what first piqued your interest in crypto? How did you end up as our crypto mom, so to speak? Guys, unless you've been living underneath a rock for the past few months, then you've definitely heard me talk about one of my favorite platforms, which is Kava.

Kava connects the world's largest cryptocurrencies, ecosystems, and financial applications on DeFi's most trusted, scalable, and secure earning platform. They have borrow APYs as low as 0% and reward APYs as high as 200%. They let you mint stable coins, lend, borrow, earn, and swap safely and efficiently across the world's biggest crypto assets with a simple and intuitive user experience and the full confidence of institutional grid security and quality. Guys, if you have not checked out Kava yet, then what are you doing? You can check it out at thewolfofallstreets.link slash Kava. Do it now. Guys, I'm so excited to tell you about this new crypto cold storage solution called Arculus. Their cold storage technology keeps your crypto keys off the internet and on an Arculus keycard. With no cables and no USB connections, it insulates you from the thousands of hacking attempts that happen online every single day.

You can store, swap, and send your crypto all with a simple tap of your Arculus keycard. And if someone were to get a hold of your card, it doesn't even matter because they have three-factor authentication, ensuring that the only person with access to your crypto is you. Guys, you can check out Arculus at thewolfofallstreets.link slash Arculus. That's A-R-C-U-L-U-S. Secure your assets, secure your future with Arculus. Well, I first heard about crypto before I got to the SEC, a number of years before I got to the SEC.

Some of my colleagues were working on issues around crypto and crypto regulation specifically. So that was a little bit of an introduction for me. And I thought it was fascinating. I think it's really interesting when people think about some of the problems that have been out there for a long time in terms of money, thinking about transferring value, this idea that you can supercharge the internet by facilitating value transfer. That was a really interesting idea to me. When I got to the SEC, I knew that there would be some issues around crypto. I certainly didn't realize how many there would be. But I also knew that I would generally want to try to do something with the

SEC's approach to innovation. And so those two kind of came together pretty early in my tenure. I started in January 2018. There was early on a consideration of a Bitcoin exchange traded product. And I was in favor of approving and everyone else was in favor of disapproving. And so that was how the term came about, crypto mom. But I will say that I think it's important to underscore that, you know, I don't mind the term. I think it's kind of funny, but I'm no one's mom and I'm no industry's advocate. I'm an advocate of technologies, products and services that benefit people, that people choose to interact with because they think they will improve their lives. And the government should never be in the position of being a parent figure to anyone. Right. We are there to play an important role

in developing the rules of the game. But in the United States, decision-making should be done by the people closest to the problems, closest to the circumstances. I, as a regulator sitting in Washington, don't know what someone in the middle of the country is facing in terms of challenges,

in terms of opportunities, in terms of interests and dreams and hopes. And so let's let people who know their own circumstances make decisions for themselves. And let's not assume that we are somehow the, you know, this knowledgeable regulator who's going to beneficially decide for everyone else how to live their lives. So I always push back a little bit on that part of the Appalachian crypto mom. That makes sense. And you touched on something so important, which is something I wanted to ask you about, which is, I think everybody can agree that protecting consumers and protecting people is a net positive, right?

That's a noble goal and we need protections. But there's probably a very fine line, and I have no idea where that is, between protecting someone and preventing someone from opportunity, A, or totally alleviating them of their personal responsibility for their own financial decisions. Where is that line and how as a regulator can you possibly determine it and operate within that sort of gray zone? Well, here's how I approach it. So I, you know, I approach it from thinking if two people want to voluntarily engage in a transaction, that should generally be fine. Right.? So that's kind of the baseline. And then if there are externalities flowing out of that mutually beneficial decision, or if it appears that one

side of that transaction is actually not consenting to participate, that there's some coercion or deception involved, then that's a place where regulators can get involved to make the decision. But regulation always comes at a cost. And one of those costs is exactly the one you mentioned. It's depriving people of their choice and depriving them of their responsibility. So that individual liberty component needs to factor into our decisions as regulators. We need to realize that when we put a rule in place, we are overriding individuals' decisions. So there has to be a very good reason for us

to come to the point of deciding to do that. Now, obviously I work within the statutory framework given to us, Congress, not unelected regulators should be deciding what the securities laws look like. And in general, the decisions made by Congress when it put the securities laws in place were centered around this idea that we really want to get disclosure to people so they can make their own decisions. We don't want to make the decisions for them. Now, there have been some

departures from that over the years. They're ones that I've been pretty candid. I'm not terribly fond of. But again, I have to take my lead from what Congress wants us to do. But I do think that that notion of the importance of the individual's ability to choose for herself, sometimes get lost in Washington, we sometimes really do get very disconnected from the fact that this is, this is America, this is a place where people came, people have been drawn to over the years because of the fact that there's a freedom to choose what you want to do, what you don't want to do, what you want to buy, and what you want to sell. Sometimes it's scary to hear that Congress should be making those decisions when it's

so clear how ignorant a lot of them are about the issues that they're obviously legislating on. But I think we all agree. I mean, I think another piece of that and something it's important to remind the crypto world is Congress. They have a lot on their plate. And so they're trying to get their arms around lots of different things. It's really hard, I find, as a regulator to learn about crypto. I make an effort to do and I constantly feel like I'm trying to keep up and learn new things and talk to people and get new information so that I can make better decisions. But anything that people in the crypto world can do to sort of spoon feed it to those of us in Washington really does make it more likely that the policy coming out at the other end will be better.

Yeah, I've spoken with Cynthia Lummis, and that was literally her one point that she wanted to hammer home. If you want to make a change, call your congressional aide, your congressman's aide aid and send them a book, send them the Bitcoin standard, educate them, bother them, send them emails, forward them articles. And I really think that a lot of us maybe are jaded and don't think that that can help, but seemingly I think it really can. And that's an important takeaway is that sort of the onus is on us to educate them because it's not something that's first on their agenda, sort of, as you said. Yeah. It makes a lot of sense.

Yeah, no. And I think even if, you know, maybe you send five articles over and the aide only has time to read one of them, but that one of them could really change the way that person thinks. I know I've gotten input from people that's really been quite helpful to me in shaping the way I think about things. We talked about sort of the border between protecting people and preventing them from opportunity.

And one of the most gratuitous examples of that, obviously, is accredited investor laws, right? And I know why they exist, but I can say anecdotally, knowing people who have a certain amount of wealth, but it's not above a line and preventing them from the investment opportunities that are literally perpetuating wealth in the United States, right? You can't

invest in a successful hedge fund because you don't have enough money. It just seems unfair and illogical. Do you think that we'll ever get maybe a scale back of those accredited investor laws to allow more opportunity for people with a bit less money? Well, I certainly have the same reaction, and I think it really starkly points out, you know, well, when you think of it, for example, like there's some families where wealth is passed down generationally, and there are other families where that's not true. And then all of a sudden, you have two kids from those two families, the one that inherited a lot of wealth and the other that worked really hard and spends nights and weekends learning about a particular company or a particular industry. And you tell

the kid who inherited a lot of wealth, who's out, you know, doing something else, non-productive on the nights and weekends, yeah, go ahead, you can invest with the person who spent all this time learning about things and really does know how to invest and has put a lot of thought into it. No, sorry, you don't have enough wealth or income, you know, come back in 10 years and we'll see if you're up to standard. That's a pretty crazy result. But I think what gives me a little bit of hope is that under our last chair, Chairman Clayton, he put on the agenda a rule change around accredited investors. And we did adopt that

rule change. It allows financial professionals to qualify, for example, as accredited investors. And we did adopt that rule change. It allows financial professionals to qualify, for example, as accredited investors, even if they don't meet those wealth and income thresholds. It did open the door to potentially further expanding that to include people who have educational certifications or some other specific knowledge that might qualify them. I hope that people will walk through that door. I hope that we'll see an expansion. But again, the desire to protect people, to make sure that people aren't putting all of their money into an enterprise that's then going to fail, I get that desire to protect. And so, as you said, you can understand where the accredited investor idea came from,

but it really does put people in pretty uneven positions that don't seem to make a lot of sense in practical reality. Yeah, I think everyone wants sort of the same starting line for everybody, right? Where you end up is sort of on you, but everybody should have at least the access to equal opportunity, I think, you know, and I think that that's a pretty sensible approach. We talked about how, you know, you in Washington, it's very difficult to know what somebody in the middle of the country needs or wants or their personal expectations and situation. And so obviously, it's very hard to regulate on the knowledge of those things. We also have the companies now providing theoretical frameworks for regulation and sending them to the SEC. I know Coinbase did it. I believe FTX has done it as well.

You talk about how regulators can't know everything about everyone everywhere and the people close to it should be the ones doing it. What do you think of the idea that these companies are proposing the framework themselves? Well, I mean, I think it's great. I welcome input from everyone, whether it's a company or users of crypto. Of course, when we get input like that, we're always thinking, okay, well, you know, this company has its own particular point of view based on its own particular desire to make a profit, right? So we have to take that into accountat that prevents competitors from coming in. That's one of the things I worry about actually with our current rule set, that it works well for large financial institutions that are very steeped in regulation, but for new entrants, it's really difficult to navigate those waters. Definitely, I welcome input. I invite people to come talk to me,

come tell me what you think the regulations should look like, and we'll factor that into what we do. Or certainly I will take that into account as I think about how to regulate. Yeah, it's sort of a theme, right? It works well for the big players. We know about, I think we generally know that in the country, and that it's a little more difficult for the smaller players in the smaller companies.

It's also extremely expensive, right? I mean, if you're a startup and you're trying to innovate and doing something brand new, it would literally cost you probably every dollar that you raised just to approach regulation and try to figure out where you stand. Yeah. I mean, it's funny that you mentioned that because I just had a conversation with some young students at an innovation center and they're thinking about, you know, ways to solve, uh, ways to solve very immediate problems that they're seeing in their community. And they want to build these businesses around these solutions that they've come up with. Um, and they're, they're so focused on thinking about the problem and the solution. And then you throw in there and you've got to understand all of the securities laws. Yeah, well, that's awfully hard for an entrepreneur with nothing to figure out. So we have to figure out ways to simplify access to capital in a way that's safe, obviously, for investors, but that cuts through some of that

red tape. That's such a difficult position to be in, I would imagine, as a regulator, because you want innovation, but you don't want anyone to get hurt. Right. And I think that most innovators, we can agree, generally have positive intentions and are just trying to create something. And my fear is that this lack of clarity here is going to send those people offshore. The United States has always prided itself on being the center of technological innovation and thinking. And that might be a very hard argument to make very soon if there's no clarity. Yeah, we really need to make sure that people want to come here,

not only to build companies, but to finance their companies. We want this to be the go-to place. This is what's made our society so rich is we've drawn people from all over the world who collaborate together and build things here. And we really need to maintain that. And I think part of that is we have to remember that regulation can't do all the work.

We have to teach investors that you've got to ask questions. You shouldn't be ashamed to ask questions. You should be on the lookout for red flags. And so I always like to lace that message in too, to say, you can be empowered to ask questions and decide whether this is a good use of your money or not. You don't have to rely on us to tell you that. I agree. So you said in 2018, when you first joined, you were the only one who was in favor of a Bitcoin ETF, right? An exchange traded product, basically. That's how you redeemed Crypto Mom. We obviously just saw the approval of a Bitcoin

futures ETF. I think something that many of us agree is probably a subpar, suboptimal product, but at least we got part of the way there. So I'm curious your thoughts on the Bitcoin futures ETF versus a spot ETF approval. And if there's any hope that we might expressed about the SEC sort of being comfortable with allowing people to access Bitcoin, but do so sort of through roundabout routes, whether it's through a futures-based product or through maybe an over-the-counter product through a company that may have exposure to Bitcoin. And so, you know, and again, those are, I think people should have those options to invest that way. But it's a little bit hard to understand why we're not more open to a spot based product, which is trading already in many other

countries. It certainly would be a, it's expected that it would be a cheaper product for folks and less complicated to manage than a futures-based product. So I think when you look at what the SEC is saying and pointing to the potential for manipulation in the Bitcoin markets, I think that also runs a little bit counter to the dynamism of those markets to the fact that they're 24-hour markets. There's a lot of arbitrage going on. They're large markets with pretty sophisticated players. And so do we need to have them regulated exactly like the securities markets in order to get comfortable with the spot-based product? I don't think that should be the standard, and I hope that's not the standard. But, you know, of course, we'll consider every application on its facts and circumstances, but I found the argument can be made that a spot ETF would actually be beneficial to consumers that capture more of the actual value and it would trade closer to the spot price.

And I think the notion that this market is more manipulated than others is, I mean form of manipulating markets than anything that's happening in the Bitcoin market. It just sometimes feels like maybe because we're new that we're being bullied, not by the SEC, just in general, right? That there's just this perception yet again, that we're the bad guys, everything is manipulated, it's a fake market, and it's not real. But there's a lot of people you touched on earlier in other countries, especially that are using this every single day to survive, right? If you live somewhere that has hyperinflation in a Venezuela or Turkey or somewhere like that, you literally are storing your value in Bitcoin. Shouldn't that be the most important view that we take on the asset, the positives and not the negatives? Yeah, I mean, to be fair, we do have to, you know, we've got a statute in place that tells us what we have to look at when we consider one of these exchange traded products. But I think

even applying that lens to it, at least, as I've said, in my dissents from ones that I've looked at in the past, I don't think that we get to disapproval if we apply that statutory framework. And, you know, again, facts and circumstances matter. You have to look at each one on its facts and circumstances. But I think some of these arguments being thrown up look more to me like merit regulation than they do, you know, a fair objective application of that standard. Okay. So assuming best case scenario and that the SEC, CFTC, the Congress and the administration start to take this very seriously and say, we need to regulate this and it has to happen, what's the soonest do you think that companies in the United States could get some clarity? That's a very good question.

I mean, I think if Congress gets involved, it does take some time. On the positive side, a number of members of Congress have introduced different approaches to regulating this space. So they're clearly very engaged in thinking about this. And there are quite a few members of Congress who are pretty engaged. In terms of regulatory clarity from the SEC, I mean, that could come very, very quickly and very easily if we chose to, because again, we do have these tools that we could use tomorrow. We could start working on doing something. So

it's possible, but again, we'll have to see. A lot of that really does depend on what direction the chairman decides to go. Maybe Senator Lummis' answer was the correct one, but what can your average person do, I guess, outside of trying to educate your local politician? What can we do as individuals to help push this forward? Well, I think that, you know, talking to us in Washington is important. It's helpful to me. If you see something you think I need to read or, you know, pay attention to, please do send it my way. Talk to my colleagues, you know, explain to them why this is important to you. If, you know, again, our doors are open. I say my door is open, but I know my colleagues have open doors too. And so take advantage of that.

We work for you. And so please do remember that and don't hesitate to talk to us. I mean, as we finish up here, it sounds like there is hope for optimism, right? It always seems like doom and gloom when you're in the community itself, of course, but I think that that's under a very small umbrella. It sounds like we could get some reasonable clarity and reasonable regulation and see things push forward in a positive light. Is that accurate? I certainly hope so. I mean, I too get impatient, but I hope so. I know the clock is ticking, right? Crypto moves so fast. Regulators move so slow. And that contrast is evident to me every single day, but I still remain hopeful.

Yeah. I kind of joked recently that by the time we get a Bitcoin spot ETF, there'll be some new product or some new innovation that'll completely make it irrelevant anyways. And we won't even be talking about it because the velocity of this space, which is impossible for you as regulators, obviously, I mean, the velocity of things being developed is impossible, even to keep up with if you're in it 24 seven, like I feel like I am myself. So I thank you for the Yeah, but you've got it. That's why you've got to build rules in a way that doesn't depend on the regulator, knowing every latest iteration, but you know, just built on this principle of we have to let people experiment and try things with appropriate protections in place. Well, it seems like the

safe harbor is a very reasonable first step to allowing that to happen. Let them innovate and prove that they're within the framework. That makes a lot of sense. Well, thank you for all that you do for taking the time to speak with us. Where can people follow you and follow along with the saga of the SEC and regulation? Commissioner Peirce at SEC.gov is my email address. And you can follow me on Twitter, Hester Peirce. Scott, thank you for taking the time to talk to me. It's been a delight. I truly appreciate it. And I look forward to another conversation six months or a year down the road with a lot more progress, hopefully. Oh, that'd be great. Thank you.