SEC Commissioner Hester Peirce Criticises SEC Actions on Poloniex Cryptocurrency Exchange

Commissioner SEC Hester Peirce criticised the agency for enforcement actions against the cryptocurrency exchange Poloniex. In her view, the regulator’s requirements could not be met due to the absence of a clear regulatory framework.

Thoughts on Poloniex action, which reflects our continued enforce-don’t-figure-out-how-to-reasonably-regulate approach: https://t.co/XScIMTFTDd

— Hester Peirce (@HesterPeirce) August 9, 2021

“Thoughts on actions regarding Poloniex, which reflect our usual approach of ‘coerce, not figure out how to regulate prudently,’” wrote Peirce.

On June 9, the SEC announced the disgorgement of $10 million from Poloniex. According to the agency, between July 2017 and November 2019 the exchange offered clients unregistered securities in the form of digital tokens.

The exchange did not admit or deny the allegations, but agreed to disgorge the ill-gotten gains of $8,484,313 and $403,995 in interest, as well as a $1.5 million penalty.

According to Peirce, Poloniex indeed did not register as a “national securities exchange” and did not obtain regulator approval to operate without that licence. However, during the period in question, the SEC was notably cautious about how regulated entities interact with crypto assets.

“If she had filed for a license, she would probably have waited… and waited… and waited some more. … Given how slowly we have been defining the order in which regulated entities can interact with cryptocurrencies, market participants, understandably, may be surprised that we are now stepping onto the stage with a sword drawn,” noted the commissioner.

Peirce also stressed that a separate problem is that the SEC does not disclose which specific assets it considered to be securities in the particular case.

That’s part of the problem—when we announce these cases, we won’t say which digital assets were securities. See Commissioner Roisman’s and my comments here: https://t.co/sdavXcwQQh

— Hester Peirce (@HesterPeirce) August 9, 2021

Earlier, SEC Chair Gary Gensler warned of a possible tightening of the oversight regime to protect investors in the crypto market. He also noted that regulating bitcoin exchanges is the government’s easiest way to bring order to the new market.

The Commission is ready for constructive dialogue with interested parties, according to the agency head.

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