Interview: SEC Commissioner Hester Peirce on Reg Crypto

Jacob Robinson (0:00)

I sat down with Commissioner Hester Peirce of the US. Securities and Exchange Commission, who also leads the Commission's Crypto Task Force to discuss Red Crypto.

Hester Peirce (0:08)

And I did listen to the show that you did on Red Crypto, and I thought that it was a very helpful discussion and appreciate people's close read and thinking about it. And I hope that we'll get folks writing comment letters reflecting a wide variety of views. But I think, yeah, the goal is to create an environment in which people are encouraged to compete, they're encouraged to make disclosures again so that investors can know what they're getting.

And then we'll see where the market takes us.

Jacob Robinson (0:43)

Commissioner Peirce played a central role in getting these rules out. In this conversation, we cover what went into them. We talk about essential managerial efforts and when a project stops conducting them. We talk about whether and when the Commission will address secondary market trading. We also get into things that the Commission is thinking about next, including faults and deep end.

If you haven't listened to the full explainer on Reg Crypto, that's episode 207 This conversation is a standalone interview, but that episode will give you the full background.

Now, this podcast is part of my mission to democratize access to legal information. My name is Jacob Robinson. I'm a securities regulatory lawyer turned podcaster. I'm able to make these podcasts free thanks in part to the sponsors of this episode. The presenting sponsor is Altitude. Altitude is a payments platform available in over 150 countries that lets you run all your payments across as many entities as you have on one platform with stable coins. It solves real payment headaches, and you can learn more by visiting altitude.xyz forward slash law. That's altitude.xyz forward slash law to learn more and book a demo. Thank you as well to the other sponsors of this episode, Cahill Gordon & Reindel, the Solana Policy Institute, and the Hyperliquid Policy Center. Their support is what makes this work possible. Here's my conversation with Commissioner Hester Peirce about Red Crypto.

Thank you again for joining me. Welcome back to the Law of Code podcast.

Hester Peirce (2:02)

Thanks, Jacob. It's great to be back. I have to start a course with my disclaimer before I forget, which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.

Jacob Robinson (2:13)

So Red Crypto came out. It was a very exciting time for the industry. It was a great time for podcasters in the industry like myself who got to spend a couple days digging into it. And one thing that I noticed and some commentators noticed that was more so in the Clarity Act and not as much the focus of Red Crypto assets was the secondary market transactions.

Is there a reason that that was left to something in the future that wasn't really a focal point in Red Crypto?

Hester Peirce (2:41)

Well, I think we've been pretty clear about how we're proceeding as a task force and as a commission, which is to take things step by step. We're not trying to do everything at once. The Clarity Act obviously is a very big undertaking.

I think that's part of the reason that it's taken a while because it really does try to cover a lot and we're not trying to do everything at once. In Red Crypto, we're really just trying to attack problems as they come before us and we're doing it incrementally. So I think that's what this reflects.

Jacob Robinson (3:17)

Yeah, no, and I think there's a few things that I want to touch about on that one, on that point. But just to take a step back, your Safe Harbor in 2020, it was on GitHub, a lot of people forked it. It was hard to believe it was six years ago now.

At the time, it was really built around the network reaching maturity, decentralization. We saw that as well to be a theme in the President's Working Group Report around recommendations for the SEC. Now, Rule 400 and a lot of the emphasis in the March Guidance as well in Red Crypto was around promises and representations as opposed to things like network maturity and sufficient decentralization, which still are included, but it's clear the emphasis is more on the promises made and promises fulfilled, representations made, representations fulfilled. How has your thinking evolved over determining the security like status of tokens in this regard?

Hester Peirce (4:14)

Well, I think this really follows on from the interpretive release, and the idea is that we want to have bright lines, as bright lines as we can, but we also want to, you know, tie it to the whole notion of how we and when people are taking your money with a promise to do something with it.