SEC's Crypto Task Force: A New Era for Regulation? | Hester Peirce
51:06 Share

Well, just to the point about meme coins, whether those fit within the SEC's jurisdiction at all. More generally, I mean, I think that's how we live our lives, right? If you want to go spend your money on something, you can do it. You know, people have fun with meme coins and a lot of other kinds of things, and that's completely fine. But don't assume that there is an SEC regulatory presence there. There may be, again, facts and circumstances matter, but don't assume that.

Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today on Bankless, we are speaking to SEC Commissioner and head of the SEC's crypto task force, Hester Peirce. It is absolutely incredible that we are able to speak directly to someone who is in charge of an entire governmental regulatory office as it relates to our industry and ask about the plans that they have for our regulation.

This is not the same treatment that we have received in the past, and the fact that we are in direct conversation with a regulator who wants to be collaborative rather than antagonistic comes as a huge breath of fresh air. While this is Commissioner Peirce's third time on the podcast, this time is quite different with the arrival of a new administration and a new SEC chair at the helm.

So let's go ahead and hear directly from one of crypto's biggest regulator right after we talk to some of these fantastic sponsors that make this show possible. Are you ready to see what the future of on-chain lending looks like? Look no further than Morpho, the first and only DeFi protocol integrated by Coinbase, leading the charge with the DeFi mullet. Fintech in the front, Morpho at the back.

Whether you're a business or a crypto user, Morpho is your go-to lending infrastructure for on-chain loans. Thanks to Morpho's immutable code, you can rely on the gold standard of decentralization, giving you and your projects full ownership and control. And if you're a user wanting to earn or borrow on your terms, Morpho's newly refreshed app at

app.morpho.org makes it simple to tailor your own risk-reward profile. Choose from different vaults and markets curated by trusted third parties. Plus, Coinbase users get access to crypto-backed loans right through the Coinbase app, powered by Morpho, all in just a few clicks. So whether you're a builder looking to integrate Morpho or a user searching for the most flexible DeFi lending experience, it's time to check out the brand new app,

at app.morpho.org and experience the future of on-chain lending today. In the wild west of DeFi, stability and innovation are everything, which is why you should check out Frax Finance, the protocol revolutionizing stablecoins, DeFi, and Rolex. The core of Frax Finance is FraxUSD, which is backed by BlackRock's institutional Biddle Fund. Frax designed FraxUSD for best-in-class yields across DeFi, T-bills, and carry trade returns all-in-one.

Just head to Frax.com, then stake it to earn some of the best yields in DeFi. Want even more? Bridge your Frax USD over to the Fraxdal Layer 2 for the same yield plus Fraxdal points and explore Fraxdal's diverse Layer 2 ecosystem with protocols like Curve, Convex, and more, all rewarding early adopters. Frax isn't just a protocol, it's a digital nation, powered by the FXS token.

and governed by its global community. Acquire FXS through Frax.com or your go-to DEX, stake it, and help shape Frax Nation's future. Ready to join the forefront of DeFi? Visit Frax.com now to start earning with FraxUSD and staked FraxUSD. And for Bankless listeners, you can use Frax.com slash r slash Bankless when bridging to Fraxel for exclusive Fraxel perks,

and boosted rewards. Introducing Unichain. Built for DeFi and powered by Uniswap, Unichain is the fast, decentralized layer 2 designed to tackle blockchain speed and cost challenges. With this mainnet now live, you can enjoy transactions that are up to 95% cheaper

than the ETH Layer 1, all while benefiting from an impressive one second block time that will be getting even faster very soon. Unichain is the first Layer 2 to launch as a Stage 1 rollup on Day 1. That means it comes with a fully functional permissionless proof system from the start, increasing transparency and further decentralizing the chain. More than 80 apps are joining the Unichain community, including Coinbase, Circle, Lido, Morpho, and Uniswap. You'll be able to bridge, swap, borrow, lend, and launch new assets and more from Day 1.

Built by Uniswap Labs, the team behind the protocol that's processed over 2.75 trillion in all-time volume with zero hacks, Unichain truly enhances DeFi experiences with faster, cheaper, and seamless transactions, even across chains. And soon, the Unichain Validation Network will allow anyone to run a node and earn by securing the network. Visit uniswap.org and swap on Unichain today.

Today, Bankless Nation, I'm honored to once again introduce Hester Peirce. Commissioner Peirce is an SEC commissioner who we hold in very high regard in the crypto industry for her intellectual honesty and openness towards our industry. Commissioner Peirce was given the nickname Crypto Mom when in 2018 she publicly dissented from the SEC's decision to reject a Bitcoin ETF proposed by the Winklevoss twins. This is her third time that we've hosted her on Bankless, but the context and timing of this appearance is quite different.

Gary Gensler, former SEC chair, stepped down about 20 days ago and has been replaced by acting chair Mark Ueda, who almost immediately appointed Commissioner Peirce as the head of the crypto task force for the SEC, effectively giving her the powers of the SEC chair for any and all issues related to the crypto industry.

While her leadership is just a few weeks old, she has already made some big statements about her intentions for where she wants the crypto task force to go and how it's going to impact our industry, which is going to be the main focus of the episode today. Commissioner Peirce, welcome back to Bankless. David, it's great to be here. As you know, I've got to give my disclaimer, which is that my views are my own views as a commissioner, not necessarily those of the SEC or my fellow commissioners.

Hester, I just want to do a quick vibe check. How are you feeling? There's been a pivotal 20 days that we have seen with the election of Donald Trump and his new administration that has cascaded down into the SEC. Just how's morale? How's spirit? How are things? Well, I think with respect to crypto, it's really an exciting time because, you know, I think all of us, you mentioned I'd been on this podcast before and we had these conversations about the frustrations of being at an agency that doesn't want to move forward in a positive way. And

So finally, we have that room to do it. And it's not only, you know, within the SEC, but there's a broader desire across the administration and in Congress as well to make some positive changes. And so I think that that's really very important.

So the Crypto Task Force was created on day one of the administration on January 21st, really hit the ground running the immediate repeal of SAB 121, as well as some big statements about how the Crypto Task Force wants to approach and impact the crypto industry. Just really quickly, what should we know about the Crypto Task Force?

Who composes it? What are its goals? What should we expect? Just what should we know? So the task force is made up largely of people drawn from the staff at the commission. And so it's people who have thought about these issues for a long time.

And many had ideas sort of that they could have put forward under the last administration, but that wasn't really welcome then. So these people are coming with their ideas to the task force. We are bringing in a few people from the outside. And so that is helpful as well. But it's largely an SEC staff meeting.

task force. And then we'll draw a lot on people from outside to help us think through what the right approaches are. So we welcome input from lots of people. And it's a group of people that's made up of folks with different expertise from all across the commission so that we make sure that we're thinking about all the touch points, all the different potential legal issues as we move forward on things.

So we'll be getting a lot of help also from people outside of the task force at the commission. We'll be working with people to do things. And I think that was evidenced. SAB 121, there was a lot of work that went into that, and that included from folks in the chairman's office. So there will be a lot of people helping on this. Yeah.

I believe there's been some news out of the SEC about the appointing of strategic advisors or senior advisors to the crypto task force and to the SEC. Is that who you're referring to as the people coming from the outside? Yeah. So we brought in Landon Zinda, for example, who had been at Coin Center. He's joined us. And so, again, most people will be coming from the staff, but I think we will have some helpful input from outside. Yeah.

The big thing that happened first and foremost with the crypto task force was the rescindment of SAB 121. So SAB 121 is gone. I believe I remember seeing a celebratory tweet out of you talking about announcing the rescindment of SAB 121. How do you think this takes shape next? What are you hoping is the immediate impact of this? I mean, the SAB had been a real problem for the industry because it limited the scope of people who were willing to take on the custody job.

because the consequences of being a custodian in this space were so severe. And again, this is not all about getting TradFi to come into crypto, but there are a lot of traditional custodians who could not operate in this space because it was simply the way we had set it up. It ended up being just too costly for them to be involved. And so I think it will open the door for more people to participate. I mean, it's a little bit of

It's ridiculous that it took as long as it did, because you already had Congress telling us that they didn't like it. And so now, you know, it just it took a really long time. But I think it will make it easier for people. And, you know, I think the other piece of it that was really troubling is that a lot of this was being developed at the SAB 121 stands for Staff Accounting Bulletin. It's a staff bulletin. It came out, it had a limited scope, but was interpreted more broadly. And

And then there were exceptions made, but they were made through kind of a speech by the chief accountant. And I think whatever we do in this space, we need to be more transparent, have something that applies to everyone. And I think that's what rescinding SAP 121 did, you know, put us back to where we would have been without it. Hester, you made a written statement on the SEC's website titled The Journey Begins, where you discuss the formation of the crypto task force and outlined some of its objectives.

There are a number of things that you illuminated about the crypto task force, what it's looking to do in the short and medium term as it relates to crypto entities that have issued tokens in the past, especially entities that have gone through these like great convoluted lengths to achieve some sort of like deniability about the legal status of the token that they issued. I think crypto natives would know these as any organization that has a foundation, but also many others.

You wrote, the task force is also thinking about the possibility of recommending commission action to provide temporary, prospective, and retroactive relief for coin or token offerings for which the issuing entity or some other entity willing to take responsibility provides certain specified information, keeps that information updated, and agrees not to contest the commission's jurisdiction in the event of a case of alleging fraud in connection with the purchase and sale of the token.

of the asset. What I'm hearing here, Commissioner Peirce, is that organizations have a path to get what you're calling retroactive relief for a token if some entity comes forward and takes ownership over said token while also providing information like disclosures or just data about the creation and distribution or other details of that token. Can you go into more detail about what this looks like, why this is necessary, and why you elevated this in your letter? I mean, I've talked about a safe harbor for some time, and I think

Really what I'm trying to get at here is that the prior approach to crypto from the SEC has been very much

discouraging disclosure. And I want to flip that, right? I want to encourage people to make disclosures. As all of us know, one of the exciting things about the technology is that it allows everyone to have access to the same information and the same terms and you can see everything. But it is true that when someone is starting a project and when someone is launching and building it out,

And this process may take some time, right? There are people who are more involved. And so trying to get at that information, address the information asymmetries that exist, that's really the goal. And so that's what we're trying to achieve. Again, this is still being formulated, so we welcome input. But the idea is that people could have comfort about putting disclosure out there because it would actually be a plus instead of a negative. Right.

And it would allow them the runway to get to a place where control was more dispersed. And so I think applying it retroactively would also take away some of the shadow that hangs over some of these projects in terms of where they fit. And so that's the goal. And of course, I think we have to look at the task force against the bigger backdrop, which is that Congress may put legislation out there. They may be able to pass legislation. And so we want whatever we do to

to be able to provide at least temporary relief. And then if Congress looks at that and wants to codify something similar, they could do that. If they want to do something different, they could do that. So this is intended to bridge that gap in time and enable people to start enjoying the new regulatory framework as quickly as possible.

So say I'm an entity that has issued a token in the past. I have a foundation associated with my token, or I'm about to become one of these things. I'm about to issue a token. What should I know about how to engage with the SEC? It sounds like...

details about this whole process, again, is still being formulated. So it's a work in progress. But like what should relevant entities just think about or be aware of, at least in terms of like maybe they should do something in the future? What would you say to them? Well, I think first, you know, keep an eye on the website, which you'll find our webpage at sec.gov. There's a crypto webpage. So keep an eye on that. You can sign up for email alerts from that

And you can also communicate with us. We're welcoming information. People can submit written information or they can meet with us if they prefer. Crypto at sec.gov is the email address. Incredible email. And we will ask that if people want to come in and meet with us, that they provide some sort of

plan for what they want to talk about. We want to make these meetings as substantive as possible. And so if you do have good ideas about what the safe harbor might look like, I had put out a draft safe harbor, a couple versions of it.

Over the last few years, people can take a look at that. It was actually on GitHub and someone iterated on it. So there's another version of it that people can take a look at there on GitHub as well. But again, we're not bound by that safe harbor that I put out. That's just really was trying to get the discussion going.

And so I think people should look at that journey statement that I put out and they should say, well, you know, we think you should do these things. You shouldn't do these things. Here's how we think you should approach it. It really is intended to be

Mm-hmm.

There's a second thing from your letter that I want to address around no action letters. From your letter, the task force will work to identify some areas that fall outside of the commission's jurisdiction. As an initial step, the staff welcomes requests for no action letters. Can you just define what a no action letter is? What kind of organization might be interested in receiving a no action letter? And what would they have to do to potentially receive one? A no action letter is essentially, you describe your circumstances,

And you tell that to the staff, the staff writes a letter back to you, typically the staff, sometimes the commission. And I guess it is important, let me just take a moment to say, you know, I've always emphasized that the commission is the decision maker at the SEC. There are five of us. We vote by majority vote on rules and on enforcement actions. And so I think it is important for people to bear that in mind as they're thinking about responsibility for good or bad policy at the SEC. But

But the staff can say, if you follow these circumstances, we're not going to recommend an enforcement action to the commission because the way it typically works is the staff works up a recommendation for an enforcement action and brings it to the commission. So this letter says, look, if you follow these circumstances, we won't do that. And so it gives you some comfort. Again, it is staff level typically, so that does mean that it's not something that you can –

totally take to the bank, but it's helpful in giving you a window into the staff's thinking. And, you know, a project could come in that thought it had a token that was a utility token that was completely outside of the SEC's jurisdiction. You could have a trade group come in with sort of a more generic thing. I will say that one of the things we're trying to think about carefully is

as we go through this process, is where does it make sense to have no action relief? Where does it make sense to have something more formal, like a rulemaking? What can we do in what period of time? And rulemaking does require a process. It requires input from the public, which we want. So we're trying to achieve as much as we can through that process, but also provide some of these other mechanisms, like no action relief, where people just want to

get a quick word, yeah, we think that this is not something that would warrant enforcement action. I pointed out in, we brought a case against Fly Fish Club. It was an NFT for a dining club. I think that would have been an example where perhaps they could have come in and gotten no action relief. Again, not under the past administration. I don't think that would have worked, but

something like that. Now, we could also take the issue of NFTs and say, you know what, maybe we can provide some guidance about how people should think about NFTs and the potential intersection with the securities laws. So I'm trying to be transparent here in saying, look, we're still trying to figure out what the best mechanism is to deal with things, but we welcome people to think about that with us. And if they have ideas of, you know, maybe a project that could just get carved out

they should let us know what that is. Now, I know the task force is just beginning its conversations with various, you know, entities, stakeholders inside of the crypto industry. And so this is an ongoing process. Nonetheless, previously, Gary Gensler has touted the line that crypto companies should just come in and register with the SEC. Well, everyone knew that Gary Gensler was actually holding a gun behind his back as he said this.

Now, I'm sure personally that the crypto task force is a bit different. However, I'm sure there are other people out there who are maybe a little bit more nervous, a little bit more tepid about, you know, just coming in and discussing with the SEC. Maybe they just want other people to go first and then they're ready to go. But what assurances or what would you have to say to people who are maybe a little bit more nervous about actually communicating with the SEC? No, I mean, I certainly understand that. And I have

heard references to folks who are still, you know, they're just not going to come in because they just have had such a bad experience, they feel, with the SEC. And so I think we do need to work on changing the culture and changing people's experiences with the agency. There's a lot of work that needs to be done there.

And frankly, it will probably take some successes before people will be comfortable coming in. I mean, I underscore the fact that I've been someone who has really believed in the importance of having a regulatory regime.

that recognizes that people want to do interesting things. They want to experiment with interesting things. And you can't make the process so hard that the only people who can ever do anything in our space are really large financial companies that have loads and loads of lawyers inside and outside working for them. You really have to have a system that works for people who want to come in and just say, hey,

Here's what I'm thinking of doing. You don't want to come in cold not having thought about the securities law implications, what you're doing. But I want people to be able to come in and say, here's what we're trying to do. Is there a way that we can achieve this?

We're not going to give you your legal advice, but I think we can work with you and think about what approaches make sense for projects like yours. And that discussion of what people are actually trying to do in the real world will inform then what we spend our time doing. Because as you might imagine, there are a lot of different things we can spend our time doing. And if people come in and talk to us,

it'll help us to set the priorities correctly. So, I mean, I know this is going to be a long process. Rebuilding a sort of healthy relationship is going to take some time.

But I do urge people to come in and talk to us, and I hope that their experience will be positive. And I urge them to let me know if their experiences aren't positive. You can always contact me or the task force and let us know. I think we're trying to build in the task force a culture of positive.

Finding practical, workable solutions that make sense and that don't undermine our securities laws, but at the same time, let people try to do new things. I think one issue that's out there that I think will help show to the crypto industry that you really mean it is what happens with the current swath of enforcement actions that are already out there. There's just this hairball situation.

of enforcement actions that currently exist with many crypto entities, crypto companies inside the United States. Some are very recent, some are very new. Some just have Wells notices and nothing more. Some are more further along in their process. But there's just a current, you know, charcuterie board of enforcement actions that the SEC has created in the crypto industry. What can you say about the task force intent

I know each one is its own case and circumstances, so each one has to be dealt with its own merit. But nonetheless, there is, I'm guessing, a difference in stance, difference in disposition that the SEC will have towards these ongoing current enforcement actions towards crypto companies. Anything you can shed light on on that process? I mean, there's little I can say on that front except to say that obviously it's a complicated hairball of enforcement cases, as you describe it, that we've been left with.

And we certainly are thinking about how to approach those. Each one does have to be assessed on its facts and circumstances. And so this is a really interesting project to be working on, but it's very difficult.

in part because we did take that enforcement-first approach. And when you're trying to actually make policy not using enforcement actions, the enforcement actions can get in the way of what you're trying to achieve. And so we're certainly sensitive to all the issues there, and we're working through them. Part of the untangling of that hairball, I think, will—

certainly be helped by collaboration with other entities, other agencies, mainly the CFTC and specifically around the line between securities and commodities. Now, in the previous administration, we've seen more of like a land grab, I would call it, between these two entities. Like the SEC wants everything to be a security. The CFTC wants everything to be a commodity. I don't really remember these two different agencies working well together, but

I'm hopeful that that is a different case moving forward. But what can you say about SEC and CFTC relations as it relates to the crypto industry? I mean, I'm really optimistic because one commissioner, now acting chairman, FAM, she's very interested in this industry. And she and I know each other. I know the other commissioners there as well. We've worked well together. And I actually...

Part of the reason that I wanted to take on this task is I actually have history with working through the CFTC on another set of difficult issues. So when Brian Quintenz was a commissioner at the CFTC, he and I worked closely together on marrying up our regimes around swaps and security-based swaps. And so I think we can apply some of the lessons we learned and work together similarly on these issues. And I think...

There's a possibility of getting a joint advisory committee up and running. There are more informal ways that our staff already are working together. And so I actually think we can work through these issues. At the end of the day, what I'm trying to get to is not a world where the Securities and Exchange Commission has the largest jurisdiction, but a world in which we have jurisdiction in the place where it makes the most sense.

Whether that's at the SEC, the CFTC, the FTC, the states, you know, wherever we decide that jurisdiction, we meaning ultimately Congress has to make that determination. But we want to give them the best advice possible about where it makes sense for that jurisdiction to lie. So I am optimistic that we can work through this. I mean, it's difficult even in the traditional financial markets because our jurisdictions do run into each other all the time.

And sometimes arbitrary lines have to be drawn. That's just the nature of the beast when you've got multiple regulators in this space. And so we'll be working hard on that. And again, we welcome advice on that front too. The Arbitrum Portal is your one-stop hub to entering the Ethereum ecosystem. With over 800 apps, Arbitrum offers something for everyone.

Dive into the epicenter of DeFi, where advanced trading, lending, and staking platforms are redefining how we interact with money. Explore Arbitrum's rapidly growing gaming hub, from immersed role-playing games, fast-paced fantasy MMOs, to casual luck battle mobile games.

Move assets effortlessly between chains and access the ecosystem with ease via Arbitrum's expansive network of bridges and onrifts. Step into Arbitrum's flourishing NFT and creator space where artists, collectors, and social converge and support your favorite streamers all on-chain. Find new and trending apps and learn how to earn rewards across the Arbitrum ecosystem with limited time campaigns from your favorite projects. Empower your future with Arbitrum. Visit portal.arbitrum.io to find out what's next on your Web3 journey.

With over $1.5 billion in TVL, the METH protocol is home to METH, the fourth largest ETH liquid staking token, offering one of the highest APRs among the top 10 LSTs. And now, CMETH takes things even further. This restaked version captures multiple yields across CARAC, EigenLayer, Symbiotic, and many more.

making CME the most efficient and most composable LRT solution on the market. Metamorphosis Season 1 dropped $7.7 million in Cook rewards to METH holders. Season 2 is currently ongoing, allowing users to earn staking, restaking, and AVS yields, plus rewards in Cook, METH Protocol's governance token, and more. Don't miss out on the opportunity to stake, restake, and shape the future of METH Protocol with Cook.

Participate today at meeth.mantle.xyz. Celo is transitioning from a mobile-first, EVM-compatible Layer 1 blockchain to a high-performance Ethereum Layer 2 built on OP stack with EigenDA and one block finality. All happening soon with a hard fork. With over 600 million total transactions, 12 million weekly transactions,

and 750,000 daily active users, Celo's meteoric rise would place it among one of the top layer twos, built for the real world and optimized for fast, low-cost global payments. As the home of the stablecoins, Celo hosts 13 native stablecoins across seven different currencies, including native USDT on Opera MiniPay,

and with over 4 million users in Africa alone. In November, stablecoin volumes hit $6.8 billion, made for seamless on-chain FX trading. Plus, users can pay gas with ERC-20 tokens like USDT and USDC and send crypto to phone numbers in seconds. But why should you care about Zello's transition to a Layer 2? Layer 2's Unify Ethereum, L1's

By becoming a layer two, Celo leads the way for other EVM compatible layer ones to follow. Follow Celo on X and witness the great Celo happening where Celo cuts its inflation in half as it enters its layer two era and continuing its environmental leadership.

Right now, having your crypto network asset, your crypto token be labeled as a security is perceived by the industry to be just a death blow. For many reasons, it kills the chance for these networks to become truly decentralized by just limiting who and where the asset can be distributed to. But nonetheless, being a security, I don't think needs to have that negative connotation. In my mind, pure securities laws, being a security implies that there's

a team working on creating upside. And that doesn't necessarily have to be perceived to be so negative by the crypto industry. Do you think like without knowing how we get there, because there's a lot of things on the task force plate, but without knowing how we get there, do you think there's a possible world out there where a crypto token can be labeled as security and that be totally fine as it relates to the impact on the project, its token holders, the legal status of that thing? Like, what do you think about this?

Well, I mean, I think there certainly will be tokens that are securities. I think we'll likely see traditional equity securities and debt securities finding their way onto blockchains. And so from that perspective, I mean, yes, I think that they'll interact fine with the securities laws. When I think about someone trying to build a project to have wide participation by all kinds of people,

I'm not sure that a lot of those projects will fit very neatly into the securities laws. And David, you really identified in the question the concern that's been driving the way I look at a lot of this, which is you

You want to have networks that people can use without having in the back of their mind thinking, okay, all of this stuff has to run. Anytime I transfer one of these tokens, it has to run through some kind of a securities law framework with an intermediary in the middle. Obviously, that doesn't make a lot of sense in some of these cases. It would be completely opposite of what we're trying to achieve here.

And so my guess is that there will be some projects that use the securities law framework and it works for them, but I would say probably more of them in the long term, it won't work super well. And again, this is, again, I'm guessing about where things will go in the future. So you can take this all with a little bit of a grain of salt, I think.

That said, I'm sure there will be projects that will do initial offerings to fund themselves that will be securities offerings. That goes without saying. But I think when you're talking about the tokens moving forward,

peer-to-peer, I think it's less likely that a lot of that stuff you're going to want to have running through the securities framework. But you can tell me I'm wrong about that. Yeah, I think there's an imaginary scenario where I think there's a line that's drawn with securities laws where if something is a security, then every single beneficiary, owner, holder of said security is a KYC-identified individual on a database somewhere.

And that's the line that's drawn. Like if that's not the case, then usually that thing is not a security or it really does not want to become a security. Now there's a potential world out there where something is given a security status, but that is still a peer to peer transaction to unidentified holders.

And that is a line that we've never crossed, I don't think ever in the world, where some asset is given the status of a security, but it's a peer-to-peer network with pseudo-anonymous token holders and investors. And I think maybe this ultimately goes back to the safe harbor laws that we need to be able to have experimentation on this thing. But I think there's merits to having SEC securities regulations, right?

for open networks, where the token is totally open, totally permissionless as these networks have been designed. These tokens are securities in this new kind of like safe harbor framework for tokens. And that gives them some amount of investor protection, some amount of disclosure requirements to investors. Yet it does not actually like neuter the potential of these networks by having all participants forced to

do KYC or like register in some particular way. I don't have a question here, but maybe I'll just leave that open-ended. Well, I mean, I guess I'd push back a little bit on that to say, why would you want a network that's truly open? Everyone can see what's going on. I mean, granted, you need some level of technological sophistication to be able to understand that, but there are other people who are looking at the blockchain. If it's truly a public blockchain,

Why would you want to have securities overlay on that? I'm not sure that you would. Now, again, you could design a blockchain with tokens that acted like equity or debt securities, and then I think you certainly want those to be in.

So I don't know about that. Now, you bring up the KYC issue, and that is a part of our modern financial system. And I know there are people who are trying to develop solutions to that, technological solutions where you can basically identify yourself without identifying yourself. And so there's interesting promise there.

I will underscore that even as we're thinking proactively and positively about how we can move forward and marry what people want to build with the existing regulatory structure, I think we also should be asking questions about whether the existing regulatory structure is the way we want it to be. And I think one of the areas where...

I have a lot of questions, certainly, is how much financial privacy we have in this country. And I think we've really curtailed financial privacy. And this is a moment where maybe we should be asking some questions about whether that makes sense. Do you really want your government using the financial system to monitor your activity? And we can all understand there are definitely good reasons why.

why the government wants to use a system for that. You know, there are a lot of bad people doing bad things, and we all want to stop those bad people from doing bad things. But at the same time, we want to preserve the importance of financial privacy in the United States. And I think this is a moment, because things are changing and moving around, that we can really ask some of those questions about, are we even getting that balance right?

And do we want to rethink that balance and make sure that the money that we're putting into the system and the privacy loss that happens as a result of the system are yielding a benefit that is worth it? So I hope we can ask those kind of questions.

I want to turn the conversation to the topic of raising capital from U.S. investors. Many U.S. crypto investors would like to have access to investment opportunities in crypto that are closed to them due to mostly investor accreditation laws. Now, there are some registered offering exemptions that conditionally allow for U.S. investors like Reg A, Reg CF. They're not widely used in crypto today. I think this might even be the first time that some listeners have even heard the terms Reg A or Reg CF.

Will the task force change anything as it relates to U.S. unaccredited retail investors who

having access to investment opportunities. Yeah, I mean, some of that is going to be outside of the task force's remit, though I did mention, and I think you're right to bring up Reg A and red crowdfunding. Those are two mechanisms that have democratized investing. And I think those could be useful, particularly Reg A could be useful for crypto projects. But I think more generally, the SEC is likely to focus on issues around capital formation, which have sort of not been as important in recent years.

at the SEC. And one of the concerns that I hear all the time is from people who are not accredited investors because they don't have the wealth or income that would make them accredited, but really want to be able to participate in a larger part of economic growth, a lot of which is happening in private markets, most of which are not accessible to people who are not accredited investors.

And so I think we are likely, again, I don't want to guess what the new chairman coming in will put at the top of his agenda, but I think thinking about ways to allow access to the vast private markets is,

for people who are not accredited because of wealth or income is likely to be something that we're looking at and thinking about. I mean, again, it's a little bit un-American, right, to say you've got to be wealthy or have a certain level of income before we'll let you spend your money in a particular way. It always rubs me the wrong way. Yeah.

We are still waiting for the official naming of the incoming SEC chair. So we don't know. I think we have guesses as to who that is and we have guesses of what their disposition might be, but we still don't know. Well, I mean, he's certainly been nominated and this is Paul Atkins and is going through the process now. But you're right, we don't.

It hasn't been sealed. It hasn't been confirmed. It has to be confirmed. Do you think that there is a possibility by the end of his term or hypothetically Paul Atkins' term as the SEC chair that the investor accreditation laws are no longer a thing as it relates to the SEC? Or is that kind of just too big of a question? I

I think what's more likely, and again, I don't know what will happen here. And, you know, there could be legislation that changes things. I think one area that a lot of people have looked at is they've said, okay, fine, you've got your wealth and income thresholds, but why don't you look at some alternatives thresholds that you could employ that would be a little bit more open to other people who aren't as wealthy?

You could think of, you know, does someone need to take a couple community college classes and then you can get your status as accredited investor or, you know, someone who's got a PhD in chemistry, should she be able to then invest in stuff that relates to her PhD? I mean, you can think of a lot of different approaches. Some people have suggested a test. Mm-hmm.

You might not want to have that test administered by the SEC, but you could think of other organizations could administer tests. So I think that all of that is kind of on the table. People are trying to figure out what the best approach forward is. I mean, I do have the view that the accredited investor approach is just problematic in general.

but a lot of people in DC are not on the same page with me on that. Commissioner Peirce, are you familiar with Matt Levine's Certificate of Dumb Investment concept? So this is just a test or just a certificate that somebody who's potentially interested in registering with the SEC, but it's something silly, maybe like crypto investors would consider this a meme coin, but trying to have a compliant meme coin. What do you think about Matt Levine's Certificate of Dumb Investment proposal? Well, just to point about meme coins specifically,

query whether those fit within the SEC's jurisdiction at all. So I think that you've got to think about that. But just more generally, I mean, I think that's how we live our lives generally, right? If you want to go spend your money on something, you can do it. And so I think having something that says, look, there are two different

options here. You can invest in the public markets where you have this whole set of requirements that apply around disclosures, financial statements. So that's an option, and you can get the protections that go with that. Or you can invest in this other segment of the economy that allows you access to more things, but you're going in

more buyer beware, more investor beware, and you're not getting that same level of protection around mandated disclosures and mandated financial statements and those kinds of things. I mean, I think that does make sense. As long as people know that they're opting into less protection, I don't see why it's harmful to have two potential avenues for people to invest.

But that said, I think a lot of people are thinking very creatively about how they can give access to retail investors, to the private markets, maybe in a diversified fashion. Because as we all know, if you put all your eggs in one basket and you drop the basket, that's a problem. If you put your eggs in different baskets, you're giving yourselves more protection. That's just a very common investing principle, diversification. And so

Thinking about ways to give people diversified access to the private markets is something that, you know, I think I and a lot of people are thinking about. You brought up meme coins, and I want to kind of just address that conversation head on because meme coins have really represented a pretty large amount of crypto economic activity over the last two years.

Do meme coins at all flag anything in your attention? And does that change anything if there's an entity launching a meme coin? Is that different than just an end user launching a meme coin? How should parties or people launching meme coins think about these things as it relates to the SEC? Well, again, facts and circumstances matter. So I put that out there. People always have to think about facts and circumstances. The reach of the securities laws is broad. But I think just because...

something is out there and it's popular does not mean that it will fit within the SEC's jurisdiction. So I just caution people not to assume that there's going to be an SEC regulatory backstop to everything. And I think that was a message that I wanted to get across in that journey piece that I did as well to say, look, you know, I am a big believer in people having the freedom to be able to use their money in whatever way they want, but you should not assume that

that there is going to be a government agency there to set the rules for that, one, or two, to at the end of the day, when the price of something goes down, to make you whole. That just is not something you should expect. I would send the same message to institutions who are building things. Just because you get big and you're doing something that, you know, you've got a big footprint, does not mean that the government is going to come in and bail you out when you're getting ready to head for bankruptcy, right? So I think...

If we really want to live in a place where people have choices, we have to accept the responsibility that goes with those choices. And so, you know, people have fun with meme coins and a lot of other kinds of things, and that's completely fine. But don't assume that there is an SEC regulatory presence there. There may be. Again, facts and circumstances matter. But don't assume that. Mm-hmm.

One subject that's similar to this is the subject of airdropped coins, specifically towards U.S. citizens. And then previously over the last two plus years, United States citizens have been gated from receiving airdrops from crypto projects simply just as an abundance of caution from these crypto projects who want to make sure that they are

not anywhere close to violating anything but the SEC. Unknown, known or unknown. So just should airdroppers feel comfortable including United States citizens in airdrops? Or for people thinking about this, what should they pay attention to that's coming out of the SEC in the future? Well, I mean, look, that's something that we're thinking about, you know, how we can provide guidance around that as well. But I think

You can't make a blanket statement, right? It depends on the facts and circumstances of that airdrop, what you're airdropping. If you're airdropping a stock, you know, it has different implications than if you're airdropping something else. So I just, again, if people have questions about scenarios...

that they think might be useful for us to sort of provide guidance around, that's exactly the kind of thing that you should write in to [email protected]. Tell us what your generic scenario is, and that will be something that we factor into as we think about things. I do urge people to remember too that the fraud laws, securities laws, apply to— I'm not speaking in the context of airdrops specifically, just more generally—

You know, a lot of people now feel like, oh, we can do whatever we want. Well, there are fraud laws, anti-fraud laws in the United States. And if the SEC doesn't have jurisdiction and we see something that doesn't look good, we're going to

refer that on to someone else. You're going to report to the correct entity. Correct. Exactly. And so, you know, I think if we want to get the law here right, it is most helpful if people are working together toward that instead of trying to undermine that by seeing lots of people get ripped off. And that is something that I worry about that, you know, let's all be rational and adults here and figure out how to move forward. Mm-hmm.

Hesler, we've covered a lot here so far. Security versus commodities, meme coins, airdrops, all these things, enforcement actions, no action letters, which I think is very exciting. Is there anything else top of mind that's a high priority in the crypto task force that I haven't yet asked about? I mean, we've got lots of work to do on issues around broker-dealer custody, investment advisor custody. There are a lot of questions there. There are questions around

the rails of this work, you know, their questions around DeFi. So we have a lot of areas to work on and I listed 10 in that document, but there are a lot of other areas that we still have to work on. So,

I guess I would urge people to think about what their priorities are in this space and tell us what those are. Because again, we're trying to figure out how to allocate limited staff time. Another thing we didn't talk about was there are a lot of applications for exchange-traded products coming in, so we're having to deal with those too. So I hope people will...

Be patient with us as we try to work through these issues. There are just a lot of things to work through. Yeah, especially with ETFs specifically. I know I put out a question saying, hey, we're hosting Commissioner Peirce once again on the podcast. What questions do you have for her? Most of the questions were about ETFs, staked Ether ETFs, you know, Dogecoin ETFs, Solana ETFs.

Do you just have any sort of like high level like direction about the SEC's relationship with crypto ETFs as a whole? Or is it once again going to be facts and circumstances? It's going to be facts and circumstances. And so we're working through where we can provide some generic guidance on those issues so that people kind of know what the baseline approach is going to be.

And how, Hester, as a whole, what's your algorithm for prioritizing things? There's just a mountain of work that I'm sure you have to do, which I'm sure can feel pretty overwhelming. But it's also pretty clear in categories. There's different categories of work. How are you choosing to prioritize to parse through some of this mountain of work that you have to do? Yeah, I mean, there is a little bit of

work going on on all of these issues at the same time, right? That we have to do, and because we have different divisions and offices at the SEC, so we can all be working on a whole range of issues. But I think the questions around, is this covered by the SEC or is this not, are really fundamental questions.

And those are ones that I think we're trying to, as many of those as we can get out of the way early on, I think the better off we are. Because then some of the other questions disappear if you answer that question. Hester, the last time we met in real life was ETH Denver 2024, I think. We got coffee, we chatted about crypto, the SEC. At the time, we talked about the points meta in crypto, you know, the usual topics. And I asked you what your future plans were about

staying at the SEC. And I remember not really getting the most excited response back from you about your future plans to be a commissioner of the SEC. I think your words were, I want to go back home to Ohio. And now I might have assumed that have been under the context of the previous Gary Gensler administration. And so now your term with the SEC, I believe, is up in June of 2025, which is not too far away, which is why I asked the question. But now you're

with a renewed SEC. Has that changed? What is your future interest in being at the SEC? Well, certainly it's more exciting to be here at a time when we can actually make some positive, productive changes. And so I am excited about that. I've worked with

Commissioner and now acting chairman Ueda and incoming chairman Paul Atkins, I've worked with or known them for the last 20 or so years. And knowing that both of them really are excited about making some positive changes, that does make it a more positive thing to stay here for a little bit. And my term does end in June.

Depending on what the president decides to do, you can stay for a little bit past your term. And so I'm excited to be part of making some positive changes. It's been a long time of just being pretty frustrated with what we're doing. So I'm hoping to have a little bit of fun doing some positive things and seeing what happens in the real world as a result of what we're doing on the policy side here. That's what's really interesting to me. And so it's really important to me that we get the balance right.

you know, I don't want to build this just to have people getting defrauded, right? That's not the goal of this. I want this to be a moment where people can be really excited about building and trying new things, but people can also really re-embrace the notion that they have to take responsibility for what they're buying and they have to think about the consequences of that. That's what makes a market exciting is when the buyers are being discriminating and thinking about

Mm-hmm.

Commissioner Purcell, you've been with the crypto industry every step of the way. You were here before Gary Gensler, during Gary Gensler, and now you are here after the reign of Gary Gensler. And I remember just the two plus very dark years of 2023 and 2024 as it related to the crypto industry just getting just kind of a regulatory onslaught. And it was a dark era. It was like a dark era of crypto regulation. And

I think I can speak for many people in the crypto industry that having you as a chair of the SEC Commission was definitely one of the few bright spots that we had on our horizon. And the fact that you have stuck with us and helped supported our industry as the chief dissenting officer during the Gary Gensler administration and now as the head of the SEC Crypto Task Force, it has been an incredible arc.

And I don't think there are a few people who have advocated and supported our industry every step of the way as much as you have. So on behalf of the crypto industry, thank you for everything that you've done for us and your commitment to our industry. Well, I appreciate those kind words, David. But I think the more exciting thing is just

Getting to a point where we really do let people who have interesting ideas about how they can build new things, we'll be able to have those interesting ideas and not care who's sitting in my seat. I think I've said this before, but that is really important. We want to have a system that works. Yes, there are going to be things that you don't like, things that you have to do that you don't like.

But it works, and you can concentrate on building and not concentrate on thinking how many lawyers you have to hire to figure out the SEC's complicated business.

So I'm excited to get to that point where you'll never have another SEC commissioner on your show again. Commissioner Peirce, thank you so much for joining me once again. All right. Thanks, David. Take care. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in. But nonetheless, we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the bankless journey. Thanks a lot. Thank you.