Hester Peirce urges crypto industry to learn lessons from an ‘awful 2022’

Participants in the cryptocurrency community and regulators should draw lessons from the problems the industry faced in 2022. This was said by SEC Commissioner Hester Peirce at the Digital Assets at Duke conference.

In her words, the past year was “horrific, eerie, unhelpful and very bad” for both the digital assets industry and regulators. However Peirce noted that the difficulties could bear fruit in the future:

“At the heart of these lessons lies the truth that technology takes time to develop and often must be paired with innovative developments in other fields to realise its full potential”.

She emphasised that the technology underlying blockchain is not for speculation but for “solving the problem of trust.” She also urged the industry to heed “careful criticism” within and outside the community.

“Traditionally people turned to centralised intermediaries or to government […], but such technologies as cryptography, blockchain and zero-knowledge proofs offer new solutions. […] Technology is not an end in itself, but is only useful if it can ‘solve complex, entangled human problems […] and serve real people’. If it creates more problems than it solves, then critics are right to reject it”, Peirce stressed.

The commissioner added that regulation should “foster an environment in which good things thrive and bad things perish”.

“Many of the 2022 failures were linked to participants in the crypto markets engaging in the same foolish and fraudulent acts that players in other markets have been committing for centuries”, she noted.

In Peirce’s view, regulators should work with representatives of the crypto industry and be flexible. Otherwise, the decisions taken could pose problems for both the development of technology and for “human freedom”, the official concluded.

In October 2021 she spoke of the need for the SEC to engage with industry participants to creating a “sensible framework” for oversight. Later the official criticised the agency’s chair Gary Gensler for his stance on cryptocurrencies.

Back in late 2022, Peirce questioned the usefulness of the Howey test in classifying cryptocurrencies. In her view, it does not fully account for the nature of digital assets.

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