Hester Peirce Condemns SEC’s “Regulation-by-Enforcement” Approach to Cryptocurrency
On April 14, Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission (SEC), expressed her concerns regarding the regulator's new rules to change the definition of "exchange."
Peirce criticized the proposal and the SEC’s current leadership for expanding its regulatory reach to address non-existent problems, which could lead to stagnation and extinction of new technology rather than embracing its potential.
After several cryptocurrency firms raised concerns about the amendments, the SEC reopened the comment period for the revisions to Exchange Act Rule 3b-16, which relates to the definition of “Exchange.”
The proposal could subject decentralized platforms to SEC control, which Peirce believes could impose impractical standards for decentralized activity and those involved.
She further noted that the regulator failed to define the “Communication Protocol System,” and the proposal could regulate decentralized finance out of existence.
Several stakeholders have denounced the SEC’s “regulation-by-enforcement” strategy toward the cryptocurrency sector.
According to Peirce, the current definition of exchange does not easily apply to decentralized finance, where the marketplace is software, and participants may not be familiar with one another.
She accused the SEC of disregarding the proposal’s scope, vagueness, impracticality, and potential disturbance while reinforcing the deficiencies identified by those who commented on the plan.