New speech from commissioner Hester M. Peirce, present some challenges ahead clearly.
Crypto, a way to hold easily and seamlessly transfer value, has made that principle even more powerful than ever before in history; people are able to enter into transactions with others across the world without an intermediary.
Regulators, however, are used to dealing with intermediaries, because they are easy to grab hold of and regulate. So crypto poses new challenges. Those challenges are only growing as crypto evolves. The SEC is wrestling with issues such as whether digital assets are securities, how registered entities can custody digital assets in compliance with our rules, and whether regulated investment products holding bitcoin can meet regulation standards. The explosion of decentralized finance, or “DeFi,” applications designed to displace regulated entities such as exchanges and broker-dealers will pose thorny questions and decisions for the SEC in the coming years.
As this technology gains adoption outside and now inside the legacy financial system, we should figure out a way to embrace the personal liberty principles undergirding it. If we were instead to steamroll the technology’s liberty-enhancing features under the weight of regulation, we would lose a lot of the power of the new technology to afford opportunities to people whose autonomy has previously been curbed by, for example, limited access to the traditional financial system, geographic location, social standing, or subjection to a repressive government.
The Commission has been building the Consolidated Audit Trail (“CAT”) so that it can track all equities and options orders as they wend their way through the markets. As with many other ideas that give me concern from a liberty standpoint, the objective is unobjectionable—affording regulators easy and holistic insight into what is happening in the markets. Nevertheless, the price is too high. Regulators, without having any grounds for suspicion, will be able to watch every move of every person who trades in our markets. We would not find it pleasant or appropriate for a government minder to monitor our purchases at a farmers’ market, and it is no more pleasant or appropriate in an equity market. The CAT is an example of a regulatory project that got unmoored from liberty concerns as everyone was focused on very real technical concerns.
Maybe is it time for stablecoin/s on stock/s in order to avoid the CAT? your call