According to SEC Commissioner Hester Peirce, the U.S. has dropped the ball regarding regulating cryptocurrencies. She says the failure to do so has haunted her.
During a panel discussion at the D.C. Blockchain Summit, which was hosted by CNBC, Peirce said that there has been a lot of fraud in the cryptocurrency industry. She also said that the lack of regulation has led to the country's dropping the ball on the sector's regulation. The Securities and Exchange Commissioner added that this failure has long-term consequences.
"There's a lot of fraud in this space, because it's the hot area of the moment," Peirce said. "The other piece that does concern me is the way that we've sort of dropped the regulatory ball."
A massive sell-off in digital assets has happened in the past couple of weeks. The decline was caused by concerns about the volatility of certain cryptocurrencies, such as those known as stablecoins.
Stablecoins are digital currencies designed to be stable, with their values reflecting the prices of various real-world assets such as gold and the U.S. dollar. However, the collapse of UST, which was one of the most popular stablecoins in the U.S., has caused a huge amount of concern in the cryptocurrency community.
"We can go after fraud and we can play a more positive role on the innovation side, but we have to get to it, we've got to get working," Peirce said. "I haven't seen us willing to do that work so far."
Are Stablecoins Really Stable? pic.twitter.com/bjaMLG4E2r— CoinCodeCap (@coincodecap) May 11, 2022
The SEC job description is not clear when it comes to regulating cryptocurrencies. For instance, its chairman, Gary Gensler, had difficulty identifying which of the more than 19,500 cryptos that fall under his jurisdiction are actually regulated by the agency.
In his testimony before the House committee, Gensler provided some clarity regarding the agency's regulation of cryptocurrencies. He said that the SEC has the power to oversee various types of digital assets. However, the SEC chief also added that bitcoin was not under its jurisdiction.
Gensler's comments on cryptocurrencies align with Jay Clayton, an ex-SEC official. Clayton previously stated that cryptocurrencies are not secure. He referred to them as replacements for fiat currencies, such as the dollar and the euro.
The SEC has also been working on increasing its scope and regulation of cryptocurrencies. In April, Gensler said that the SEC would begin registering and regulating certain types of digital asset platforms. Then, in May, the SEC announced that it would be hiring more staff members to oversee the protection of investors in the cryptocurrency markets.
During his testimony before the House committee last week, Gensler stated that the agency would continue to work on increasing its regulation of cryptocurrencies. He also said that the agency would use the tools that Congress has given it.
According to Gensler, the agency's rules are "quite clear" when regulating cryptocurrencies. For instance, if a company raises money from the public and the investors expect a profit based on the efforts of its sponsor, then that type of security is considered a security.
However, he noted that this type of security differs from a commodity because it doesn't have an issuer, and the public doesn't expect a return on its money.