I think that'll be a big piece of what the SEC works on once it carves out things that aren't within our jurisdiction, thinking about, Okay, how do we help crypto technology and crypto products and services to be integrated into the financial system, but in a way that doesn't just say we're only going to let the incumbents play in this place, I mean in this space.
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They will be supporting Ripples's upcoming launch of r L USD. So this is a really great rewards program and if you'd like to learn more, please visit the link in the description. Welcome into the Thinking Crypto Podcast. I'm your host, Tony Edward, and my guest today is SEC Commissioner Hester Perce, Commissioner Perse. Great to see you, Happy new year.
Happy new year, Tony. It's great to be back with you. I've got to start a course with my disclaimer, which is that my views are my own views as a commissioner, not necessarily those with the SEC or my fellow commissioners.
Commissioner Purse. A lot of folks are excited about the new year twenty twenty five, lots of changes in government, lots of pro crypto initiatives, and folks looking to get regulatory clarity and legislation and all these things in place. But I would love to start with incoming SEC Chair Paul Atkins. You spent some time with him, worked with him and so forth, tell us maybe you could take us behind a curtain. What's he like? What's it like working with him in his view on the markets?
Yeah, So I did work for him actually here at the SEC, and that was from two thousand and four to two thousand and eight. I was one of his counsels, and he had been a commissioner for some time before I started working for him, and was always someone whose approach I admired. He is very a very careful thinker. He thinks a lot about how markets work, what the function of regulation is, and how the two of them interact, and tries to think down the road about what on
intel and consequences might be of regulatory decisions. He really likes to think about things from an economics lens too, and a practical lens. And he's just a wonderful person to work for. I mean I learned a tremendous amount from him because of the way he approaches problems. He is very very hard working, but loves people too, and loves to talk to people and hear what people's experiences have been with the agency, and he loves to work
with the staff at the agency. So he was a wonderful boss, and I'm really looking forward to having him come back to the SEC. I think he's the perfect person for the job. He has that deep experience with the agency, but also an appreciation for trying to make the agency more nimble and respond better to to new technology, new products, and and I think it'll be a really nice, a nice new era.
M And over the years, I've seen him talk about crypto. He's been on various podcasts, and he's done some interviews. Do you think that his experience with crypto and kind of seeing how things have been going over the past four years with the previous administration, that we might be turning a new leaf here as he comes in.
I do. I think he's someone who when he sees a problem, wants to take a proactive approach to solving it. And he you know, this agency, as as you and I have talked about in the past, has not acquitted itself particularly well with respect to crypto, and that's something that really does need to change. And and I think that he's the perfect person to bring about that change and to diagnose the problem and and help us figure
out some practical solutions. Now, of course, some of crypto will not be within our remit, and so I think even providing clarity to say there's some things that are not within our remit will be helpful to people. Some of it will be working to bring the technology into the financial markets that we regulate, and I think he'll be good at that too, because he has such a deep understanding of the markets.
Yeah, for sure. And in the long term view with tokenization, it seems there's a merging of tratifying crypto here with these traditional assets going on the blockchain. So to your point, maybe with his experience going back to two thousand and four seeing the growth of the equities market and stock market and so forth, and now that's coming on blockchain, maybe that's really great, right.
Yeah, I think that'll be a big piece of what the SEC works on once it carves out things that aren't within our jurisdiction, thinking about, Okay, how do we help crypto technology and crypto products and services to be integrated into the financial system, but in a way that doesn't just say we're only going to let the incumbents play in this place. I mean, in this space, we you know. Part of what I think is exciting is seeing the competitive landscape change and seeing new entrants come in.
And I know from working with him before that that's something he really cares about, is keeping barriers to entry low so that new players can come in and offer products and services. So I think, you know, it should be a dynamic marketplace with a solid regulatory framework. That said, all of this stuff can take time. You know, this
has been many years. Bad crypto policy has been many years in the making, and undoing it will take some time as well, But I certainly it's something that I intend to work toward in the next in the next months and years.
Yeah, And one of my questions I was going to ask you is how does the SEC. I want to make sure you use the right verbiage here repair some of the reputational damage it has taken over the years, because I'll give an example of anecdonal for me, I've heard of the SEC over the years, but over the past four years, my view of the SEC, and not you specifically and some of your folks there, but just as an agency, I'm just what is the what is going on? And and I have an anger towards the agency,
like what are they doing? So how do we fix that? And I'm not the owner who feels that way.
Yeah, well, I think we do have to address that problem. In One way is to say, you know, we really do intend to approach this area differently, and I think a lot of the well, there has been frustration with the agency and anger with agency, not only with respect to crypto, there have been other areas where people have been unhappy with the way that we've been dealing with things.
But just to focus specifically on Crypto, I do think we have some reputational repair work to do, and that really I think comes by saying, look, it is a new day. We are going to try to take a new approach to the to solving the problems here and providing regulatory clarity and then showing through incremental steps that were actually fulfilling those those promises. To try to take a new approach. One thing that I've we've talked about in the past is, you know, the SEC structure is
unusual in Washington. There are some other agencies like US that are commission based, but we are a commission where the chair has authority over the budget, the staff, and the agenda. And so when you have a new chairman coming in, that can all change. Of course, Congress sets the budget, but in terms of deciding how to allocate the resources that we get. And so I think we can really have some change because they'll be change at
the top. And I think it is important for people to know that the staff at the agency responds to the direction from the Commission. That's as civil servants, that is their obligation to take direction from the Commission. And so when the Commission changes, those directions will change. And so I'm hoping that we'll see some real change in
the way we approach things. Again, I urge people to be patient because these things can take time, but I do urge people to think about how they can be helpful in this effort, giving us concrete ideas of where we might make changes where things have not worked in the past, and then coming in with some ideas about what would you like the rule set to look like, what would you like the engagement with the outside to look like. Tell us those things and help us to
shape this agency. Reminding reminding you, of course that we work this agency works for you, and we really want to make it work for the American public.
Yeah. Absolutely, And would some of the ideas be you know, having roundtables with the crypto industry and leaders, where the
commissioners and the chair including the chair. Doesn't have to be every month obviously, but maybe the first half of the year, second half of the year type thing annual when they meet with the industry talk about some of the problems that are doing, what is the industry maybe doing to self police itself as well, but also what can the SEC do better and what can we improve for having these companies come in and register easily and so forth.
Yeah, absolutely, I think that is something that I'd really like to see. One of my concerns about how the SEC has approached crypto and frankly other areas too in recent years is that we have not really spent enough time thinking about how can we get really helpful input from the outside, and roundtables have been one way to
do that. You know, you can get a lot of input through comment letters and that's very valuable, but a roundtable brings people with different views together and then the commissioners can can hear that dialogue and the discussion and that can be very helpful. And so I do think
that roundtables will be a part of the solution. It may be that we work with the CFTC to try to do some joint roundtables and joint discussions, again recognizing that some of this stuff is not going to be within our jurisdiction at the end of the day.
And in regards to the registration aspect, right, there's been a lot of talks of the years, a lot of confusion, some parties saying, oh, it's easy, some party saying it's not easy. What are some of the solutions here? Is it updating the SEC website? Is it? I don't know. If you guys have a subdivision on crypto and that team is able to work with the industry to fast track the registration. I'm just spitballing here.
Yeah, So a lot of people are wondering, like, where is that come in and register button that needs to be on our website?
Right right?
I think it's a little more complicated than that, and
I think that's the whole point. Right. It's one thing to say come in and register, but the next piece of that has to be Okay, so someone walks through the door and you have to be willing to work with them to understand what are the unique facts and circumstances that that entity or that project, whatever it is, has and how does that line up with what we have in our regulation and what our precedent has been in this space, And then where might you need some
sort of exemptive relief to allow this to move forward? And I think there are a number of different ways to do that. We have a no action letter process which someone can come in and submit a request for no action relief, which basically the staff can issue and says, if you do it under these conditions, we're not going to recommend an enforcement action. We've seen a few of those in the crypto space, but that process could be reinvigorated.
We also can give exemptive applications and an exemptive People can come in with an exemptive application and get an exemptive order from US, which basically says, you know, we're sort of setting up some conditions that you comply with, and if you do that, then you don't have to
comply with all the requirements and the rules. And so people can come in with those requests and then you know, I think helping people think through when something is a security and when not will also be helpful for people in trying to understand whether they even have to come
in and register with us. What I think is really important is that people know that we want to have those conversations, which I can tell you that I certainly do want to have those conversations, and I expect this new SEC to want to have those conversations and want to do so in a way that actually leads to concrete results at the end of the day, and not just conversation after conversation while your funding is drying up
because nothing's moving forward. Another idea that I've put forward is some sort of an innovation experimental sandbox type thing where people could do small projects and could move forward with small projects working then toward longer term relief. Years ago put put out a safe harbor proposal. We could do something like that. So I think there's a lot
that's on the table. And again that's why I encourage people if they have great ideas about either procedure or you know, specifics on what an exempt, a useful exemption might look like, come in and tell us what you think that should be and.
Would it be helpful. Also, in addition to let's say, these projects come in, they talk to you, they show you exactly what they're doing right, what they're running on their blockchain, that the SEC leverages tools like chainalysis where you can plug into any blockchain and beauty on chain data, so you're a better informed to know. Okay, are they telling the truth? Are these tokens actually globally distributed? What you know, what's happening, you see everything behind the scenes.
I don't know if the SEC uses tools like that already, would that make sense?
Yeah, I mean, we have some very sophisticated tools and sophisticated people at the agency, and so certainly want to take advantage of that. And you know, I've been very impressed by the depth of knowledge of some of our staff, and we'll put that to work. I think your other point, though, is that there are aspects of this technology that allow for unique transparency that hasn't been possible before, and let's take advantage of that. I mean, that's a wonderful thing.
And that's part of why I think some people have looked at the SEC's approach in the past and have said, it's sort of strange that the SEC is taking this negative approach when there's so many aspects of the technology that we could use to really improve transparency, to improve access for people and so I hope that we can take advantage of those tools where it's appropriate.
Yeah. Absolutely, Now in regards to rulemaking and working with Congress, and I know, maybe getting ahead of ourselves yet because Paul Akins is not even in office yet, but I'm assuming that you and the new incoming chair and the other commissioners are going to work more with Congress to get some better legislation through. Obviously, their FIT twenty one bill went through the House last year, a version may go through the Senate this year. I saw the Senate
started a Digital Asset subcommittee. So how are you planning to work with Congress for rulemaking?
Well, I think one important role that the SEC has is to work to provide technical assistance to Congress as they're thinking through different legislation. And so that's an area where we can lend our expertise just so that folks in Congress can understand how that new legislation might interact with our existing statutory and regulatory framework. And so I
think that can be helpful. And then as we take steps here at the Agency to try to do what we can with our existing authority, it will become more apparent where maybe more authority where there really are regulatory gaps where either we need more authority or another regulator does, or frankly, where Congress comes in and says, you know what, we've decided this is an area where we really don't want there to be regulation, but our activities will I
think shed light on where those those gaps really are. So I expect that we'll be working closely. And you know, we always we always welcome, of course input from our from from Congress and welcome the opportunity to work with them.
Yeah, for sure. Now with SEC Chair Paul Atkins coming in, a change in the tone and an approach to crypto and uh, we get a pro crypto Congress, we get a propate crypto president. Do you foresee the SEC collectively
dropping some non fraud cases? And I want to make sure you've been clear in that people who are doing bad activities fraud and so forth, to face the law, of course, but non fraud cases where we need Congress to act that the SEC may drop some of these cases, and it may be faster settlements in some of the smaller cases.
Again, I don't want to get ahead of the new Commission in terms of what will happen I think that the litigation. Then, This has been my point all along, Trying to lead crypto policy and set crypto policy using enforcement is really very bad for a lot of reasons. One thing it does is it takes a specific set of actors or a specific actor and a specific set of facts, and it sort of defines where where policy
is based on that. So we've seen that already, right, we have settlements with entities, and people all then look at those settlements and they say, well, that's what I have to do. They assume that that's what they have to do, and so it becomes sort of a de facto rule, and that really isn't the best way to write rules. Congress told us when you write a rule that's generally applicable, what you need to do is you
need to go through notice and comment rulemaking. And so I don't want to let our enforcement policy drive our enforcement program drive policy anymore now than it was doing before and has been doing so far. So I think there's some difficult days ahead for all of us as we think through how to move forward.
Now. I want to talk to you about ETS because the big Quininny Theoremys, Spotty tips have been a success, incredible adoption, incredible inflows, and there's an appetite for it. There have been filers for Solana xrp HBr ETFs. Unite's book last year about the SEC's approach has been there needs to be a futures market, then the approval of this bodyts. I'm curious if there's any updates on that.
Do you think is going to be some deviation from needing a futures or that the futures may be under a new administration be put into place and those other all coin ETFs get approved this year.
Yeah, I mean, we'll have to see what happens. I think, as you said, there's some people who have already come in with some applicants have already come in, and I think that we will deal with each of those on its unique facts and circumstances. And one of the things people do when they come in is they say, you know, here's what you've done in the past, SEC, and here's why we think, even though what we're doing is different or slightly different from what was done in the past,
here's why we think you should move forward. And so there's that conversation, that dialogue that goes on about what the justification is for moving forward, and then we'll have to see what the new commission decides to do based
on those facts. As I as I said at the beginning, I can only speak for myself, but I think we need to just be consistent with how we approach products, not only looking in the crypto world, but how have we approached other similar products that aren't involving crypto and just apply that same kind of rationale for.
Sure, Commissioner person, I remember when we spoke early in twenty twenty four, you mentioned I think this is your last year and then your tenures up in twenty twenty six, I believe twenty five. Oh when are you? When is it a wrap up?
So my tomm ends in June. But one of the one of the ways this works is you don't have to leave on the day your term ends unless they put someone in your spot, so you can hang on for a little longer, so I have a little more time to try to see some of this progress through. I hope.
Well. I also is going to ask are you going to stay on? You know, can you be re assigned reelected? And I apologize, I don't know if we're beat you there yeah.
I mean, you can be renominated and reconfirmed, but again, I think the way it's set up, you don't have to you can you can stay on a little longer, so we'll see what happens. But I do hope to stay around a little bit so that I can can help make a difference in a positive way in how we handle crypto, and not only crypto, but some other issues. There's there's a lot of work to be done here in the next few months, So.
To confirm you're going to be here for the next four years, that's.
Right, right, That is not what I said.
I'm just seazing. I would love to have you stay at the SEC and you know, have your leadership and all those things part of the new administration longer. Obviously you're going to be here till June. Is there anything else you know from a crypto standpoint that you want to highlight? I know we touched on a lot, but if not, it's okay.
I mean I think we really touched on things. I guess. The only other thing I would say, and I apologize, I'm getting over a cold. The only other thing I'd say is I do want people to come in right and talk to us, and I want people to come in with concrete ideas of what we can do, and so the doors will be open for people to come and do that. It's most helpful if you really have some very concrete ideas set out and come in and
talk to us about that. And I think that's how we can move forward quickly, is what if people really have substance in those conversations with us. So I'm looking forward to a lot of great conversations.
Awesome mission, the purse as always. Thank you so much for your insights and your leadership, and hopefully we can do this again in a coming months as things progress and legislation and all these things are making its way through Congress and new SEC Chair Paul Acting is in place, maybe some updates to the SEC website and we can talk about all those things.
That sounds great, Tony, Thanks so much. It's always a pleasure bask past pass