Speaker 1: I think that'll be a big piece of what the
Speaker 1: SEC works on once it carves out things that aren't
Speaker 1: within our jurisdiction, thinking about, Okay, how do we help
Speaker 1: crypto technology and crypto products and services to be integrated
Speaker 1: into the financial system, but in a way that doesn't
Speaker 1: just say we're only going to let the incumbents play
Speaker 1: in this place, I mean in this space.
Speaker 2: This episode is brought to you by Uphold, which is
Speaker 2: a great crypto platform that I've been using since twenty eighteen.
Speaker 2: Uphold makes it easy to buy, sell, trade cryptocurrencies like
Speaker 2: bitcoin and all coins. In fact, they have three hundred
Speaker 2: plus cryptocurrencies on their platform, and they carry precious metals
Speaker 2: such as gold and silver, and you can swap between
Speaker 2: these assets, so it's really unique. Uphold is safe and reliable.
Speaker 2: I've never had any issues with them, and they are
Speaker 2: one hundred percent reserve. You can review their transparency report.
Speaker 2: They don't commingle or lend out your funds now. Uphold
Speaker 2: recently launch a great product called Uphold Rewards, and it's
Speaker 2: packed with many benefits. You can earn up to five
Speaker 2: point twenty five percent on stable coins. Get twenty four
Speaker 2: our early access to new token listings and unlock exclusive
Speaker 2: crypto insights, and the support a variety of stable coins
Speaker 2: such as PYUSD that's PayPal stable Coins, Circles, USDC, and USBC.
Speaker 2: They will be supporting Ripples's upcoming launch of r L USD.
Speaker 2: So this is a really great rewards program and if
Speaker 2: you'd like to learn more, please visit the link in
Speaker 2: the description. Welcome into the Thinking Crypto Podcast. I'm your host,
Speaker 2: Tony Edward, and my guest today is SEC Commissioner Hester Perce,
Speaker 2: Commissioner Perse. Great to see you, Happy new year.
Speaker 1: Happy new year, Tony. It's great to be back with you.
Speaker 1: I've got to start a course with my disclaimer, which
Speaker 1: is that my views are my own views as a commissioner,
Speaker 1: not necessarily those with the SEC or my fellow commissioners.
Speaker 2: Commissioner Purse. A lot of folks are excited about the
Speaker 2: new year twenty twenty five, lots of changes in government,
Speaker 2: lots of pro crypto initiatives, and folks looking to get
Speaker 2: regulatory clarity and legislation and all these things in place.
Speaker 2: But I would love to start with incoming SEC Chair
Speaker 2: Paul Atkins. You spent some time with him, worked with
Speaker 2: him and so forth, tell us maybe you could take
Speaker 2: us behind a curtain. What's he like? What's it like
Speaker 2: working with him in his view on the markets?
Speaker 1: Yeah, So I did work for him actually here at
Speaker 1: the SEC, and that was from two thousand and four
Speaker 1: to two thousand and eight. I was one of his counsels,
Speaker 1: and he had been a commissioner for some time before
Speaker 1: I started working for him, and was always someone whose
Speaker 1: approach I admired. He is very a very careful thinker.
Speaker 1: He thinks a lot about how markets work, what the
Speaker 1: function of regulation is, and how the two of them interact,
Speaker 1: and tries to think down the road about what on
Speaker 1: intel and consequences might be of regulatory decisions. He really
Speaker 1: likes to think about things from an economics lens too,
Speaker 1: and a practical lens. And he's just a wonderful person
Speaker 1: to work for. I mean I learned a tremendous amount
Speaker 1: from him because of the way he approaches problems. He
Speaker 1: is very very hard working, but loves people too, and
Speaker 1: loves to talk to people and hear what people's experiences
Speaker 1: have been with the agency, and he loves to work
Speaker 1: with the staff at the agency. So he was a
Speaker 1: wonderful boss, and I'm really looking forward to having him
Speaker 1: come back to the SEC. I think he's the perfect
Speaker 1: person for the job. He has that deep experience with
Speaker 1: the agency, but also an appreciation for trying to make
Speaker 1: the agency more nimble and respond better to to new technology,
Speaker 1: new products, and and I think it'll be a really nice,
Speaker 1: a nice new era.
Speaker 2: M And over the years, I've seen him talk about crypto.
Speaker 2: He's been on various podcasts, and he's done some interviews.
Speaker 2: Do you think that his experience with crypto and kind
Speaker 2: of seeing how things have been going over the past
Speaker 2: four years with the previous administration, that we might be
Speaker 2: turning a new leaf here as he comes in.
Speaker 1: I do. I think he's someone who when he sees
Speaker 1: a problem, wants to take a proactive approach to solving it.
Speaker 1: And he you know, this agency, as as you and
Speaker 1: I have talked about in the past, has not acquitted
Speaker 1: itself particularly well with respect to crypto, and that's something
Speaker 1: that really does need to change. And and I think
Speaker 1: that he's the perfect person to bring about that change
Speaker 1: and to diagnose the problem and and help us figure
Speaker 1: out some practical solutions. Now, of course, some of crypto
Speaker 1: will not be within our remit, and so I think
Speaker 1: even providing clarity to say there's some things that are
Speaker 1: not within our remit will be helpful to people. Some
Speaker 1: of it will be working to bring the technology into
Speaker 1: the financial markets that we regulate, and I think he'll
Speaker 1: be good at that too, because he has such a
Speaker 1: deep understanding of the markets.
Speaker 2: Yeah, for sure. And in the long term view with tokenization,
Speaker 2: it seems there's a merging of tratifying crypto here with
Speaker 2: these traditional assets going on the blockchain. So to your point,
Speaker 2: maybe with his experience going back to two thousand and
Speaker 2: four seeing the growth of the equities market and stock
Speaker 2: market and so forth, and now that's coming on blockchain,
Speaker 2: maybe that's really great, right.
Speaker 1: Yeah, I think that'll be a big piece of what
Speaker 1: the SEC works on once it carves out things that
Speaker 1: aren't within our jurisdiction, thinking about, Okay, how do we
Speaker 1: help crypto technology and crypto products and services to be
Speaker 1: integrated into the financial system, but in a way that
Speaker 1: doesn't just say we're only going to let the incumbents
Speaker 1: play in this place. I mean, in this space, we
Speaker 1: you know. Part of what I think is exciting is
Speaker 1: seeing the competitive landscape change and seeing new entrants come in.
Speaker 1: And I know from working with him before that that's
Speaker 1: something he really cares about, is keeping barriers to entry
Speaker 1: low so that new players can come in and offer
Speaker 1: products and services. So I think, you know, it should
Speaker 1: be a dynamic marketplace with a solid regulatory framework. That said,
Speaker 1: all of this stuff can take time. You know, this
Speaker 1: has been many years. Bad crypto policy has been many
Speaker 1: years in the making, and undoing it will take some
Speaker 1: time as well, But I certainly it's something that I
Speaker 1: intend to work toward in the next in the next
Speaker 1: months and years.
Speaker 2: Yeah, And one of my questions I was going to
Speaker 2: ask you is how does the SEC. I want to
Speaker 2: make sure you use the right verbiage here repair some
Speaker 2: of the reputational damage it has taken over the years,
Speaker 2: because I'll give an example of anecdonal for me, I've
Speaker 2: heard of the SEC over the years, but over the
Speaker 2: past four years, my view of the SEC, and not
Speaker 2: you specifically and some of your folks there, but just
Speaker 2: as an agency, I'm just what is the what is
Speaker 2: going on? And and I have an anger towards the agency,
Speaker 2: like what are they doing? So how do we fix that?
Speaker 2: And I'm not the owner who feels that way.
Speaker 1: Yeah, well, I think we do have to address that problem.
Speaker 1: In One way is to say, you know, we really
Speaker 1: do intend to approach this area differently, and I think
Speaker 1: a lot of the well, there has been frustration with
Speaker 1: the agency and anger with agency, not only with respect
Speaker 1: to crypto, there have been other areas where people have
Speaker 1: been unhappy with the way that we've been dealing with things.
Speaker 1: But just to focus specifically on Crypto, I do think
Speaker 1: we have some reputational repair work to do, and that
Speaker 1: really I think comes by saying, look, it is a
Speaker 1: new day. We are going to try to take a
Speaker 1: new approach to the to solving the problems here and
Speaker 1: providing regulatory clarity and then showing through incremental steps that
Speaker 1: were actually fulfilling those those promises. To try to take
Speaker 1: a new approach. One thing that I've we've talked about
Speaker 1: in the past is, you know, the SEC structure is
Speaker 1: unusual in Washington. There are some other agencies like US
Speaker 1: that are commission based, but we are a commission where
Speaker 1: the chair has authority over the budget, the staff, and
Speaker 1: the agenda. And so when you have a new chairman
Speaker 1: coming in, that can all change. Of course, Congress sets
Speaker 1: the budget, but in terms of deciding how to allocate
Speaker 1: the resources that we get. And so I think we
Speaker 1: can really have some change because they'll be change at
Speaker 1: the top. And I think it is important for people
Speaker 1: to know that the staff at the agency responds to
Speaker 1: the direction from the Commission. That's as civil servants, that
Speaker 1: is their obligation to take direction from the Commission. And
Speaker 1: so when the Commission changes, those directions will change. And
Speaker 1: so I'm hoping that we'll see some real change in
Speaker 1: the way we approach things. Again, I urge people to
Speaker 1: be patient because these things can take time, but I
Speaker 1: do urge people to think about how they can be
Speaker 1: helpful in this effort, giving us concrete ideas of where
Speaker 1: we might make changes where things have not worked in
Speaker 1: the past, and then coming in with some ideas about
Speaker 1: what would you like the rule set to look like,
Speaker 1: what would you like the engagement with the outside to
Speaker 1: look like. Tell us those things and help us to
Speaker 1: shape this agency. Reminding reminding you, of course that we
Speaker 1: work this agency works for you, and we really want
Speaker 1: to make it work for the American public.
Speaker 2: Yeah. Absolutely, And would some of the ideas be you know,
Speaker 2: having roundtables with the crypto industry and leaders, where the
Speaker 2: commissioners and the chair including the chair. Doesn't have to
Speaker 2: be every month obviously, but maybe the first half of
Speaker 2: the year, second half of the year type thing annual
Speaker 2: when they meet with the industry talk about some of
Speaker 2: the problems that are doing, what is the industry maybe
Speaker 2: doing to self police itself as well, but also what
Speaker 2: can the SEC do better and what can we improve
Speaker 2: for having these companies come in and register easily and
Speaker 2: so forth.
Speaker 1: Yeah, absolutely, I think that is something that I'd really
Speaker 1: like to see. One of my concerns about how the
Speaker 1: SEC has approached crypto and frankly other areas too in
Speaker 1: recent years is that we have not really spent enough
Speaker 1: time thinking about how can we get really helpful input
Speaker 1: from the outside, and roundtables have been one way to
Speaker 1: do that. You know, you can get a lot of
Speaker 1: input through comment letters and that's very valuable, but a
Speaker 1: roundtable brings people with different views together and then the
Speaker 1: commissioners can can hear that dialogue and the discussion and
Speaker 1: that can be very helpful. And so I do think
Speaker 1: that roundtables will be a part of the solution. It
Speaker 1: may be that we work with the CFTC to try
Speaker 1: to do some joint roundtables and joint discussions, again recognizing
Speaker 1: that some of this stuff is not going to be
Speaker 1: within our jurisdiction at the end of the day.
Speaker 2: And in regards to the registration aspect, right, there's been
Speaker 2: a lot of talks of the years, a lot of confusion,
Speaker 2: some parties saying, oh, it's easy, some party saying it's
Speaker 2: not easy. What are some of the solutions here? Is
Speaker 2: it updating the SEC website? Is it? I don't know.
Speaker 2: If you guys have a subdivision on crypto and that
Speaker 2: team is able to work with the industry to fast
Speaker 2: track the registration. I'm just spitballing here.
Speaker 1: Yeah, So a lot of people are wondering, like, where
Speaker 1: is that come in and register button that needs to
Speaker 1: be on our website?
Speaker 2: Right right?
Speaker 1: I think it's a little more complicated than that, and
Speaker 1: I think that's the whole point. Right. It's one thing
Speaker 1: to say come in and register, but the next piece
Speaker 1: of that has to be Okay, so someone walks through
Speaker 1: the door and you have to be willing to work
Speaker 1: with them to understand what are the unique facts and
Speaker 1: circumstances that that entity or that project, whatever it is,
Speaker 1: has and how does that line up with what we
Speaker 1: have in our regulation and what our precedent has been
Speaker 1: in this space, And then where might you need some
Speaker 1: sort of exemptive relief to allow this to move forward?
Speaker 1: And I think there are a number of different ways
Speaker 1: to do that. We have a no action letter process
Speaker 1: which someone can come in and submit a request for
Speaker 1: no action relief, which basically the staff can issue and says,
Speaker 1: if you do it under these conditions, we're not going
Speaker 1: to recommend an enforcement action. We've seen a few of
Speaker 1: those in the crypto space, but that process could be reinvigorated.
Speaker 1: We also can give exemptive applications and an exemptive People
Speaker 1: can come in with an exemptive application and get an
Speaker 1: exemptive order from US, which basically says, you know, we're
Speaker 1: sort of setting up some conditions that you comply with,
Speaker 1: and if you do that, then you don't have to
Speaker 1: comply with all the requirements and the rules. And so
Speaker 1: people can come in with those requests and then you know,
Speaker 1: I think helping people think through when something is a
Speaker 1: security and when not will also be helpful for people
Speaker 1: in trying to understand whether they even have to come
Speaker 1: in and register with us. What I think is really
Speaker 1: important is that people know that we want to have
Speaker 1: those conversations, which I can tell you that I certainly
Speaker 1: do want to have those conversations, and I expect this
Speaker 1: new SEC to want to have those conversations and want
Speaker 1: to do so in a way that actually leads to
Speaker 1: concrete results at the end of the day, and not
Speaker 1: just conversation after conversation while your funding is drying up
Speaker 1: because nothing's moving forward. Another idea that I've put forward
Speaker 1: is some sort of an innovation experimental sandbox type thing
Speaker 1: where people could do small projects and could move forward
Speaker 1: with small projects working then toward longer term relief. Years
Speaker 1: ago put put out a safe harbor proposal. We could
Speaker 1: do something like that. So I think there's a lot
Speaker 1: that's on the table. And again that's why I encourage
Speaker 1: people if they have great ideas about either procedure or
Speaker 1: you know, specifics on what an exempt, a useful exemption
Speaker 1: might look like, come in and tell us what you
Speaker 1: think that should be and.
Speaker 2: Would it be helpful. Also, in addition to let's say,
Speaker 2: these projects come in, they talk to you, they show
Speaker 2: you exactly what they're doing right, what they're running on
Speaker 2: their blockchain, that the SEC leverages tools like chainalysis where
Speaker 2: you can plug into any blockchain and beauty on chain data,
Speaker 2: so you're a better informed to know. Okay, are they
Speaker 2: telling the truth? Are these tokens actually globally distributed? What
Speaker 2: you know, what's happening, you see everything behind the scenes.
Speaker 2: I don't know if the SEC uses tools like that already,
Speaker 2: would that make sense?
Speaker 1: Yeah, I mean, we have some very sophisticated tools and
Speaker 1: sophisticated people at the agency, and so certainly want to
Speaker 1: take advantage of that. And you know, I've been very
Speaker 1: impressed by the depth of knowledge of some of our staff,
Speaker 1: and we'll put that to work. I think your other point, though,
Speaker 1: is that there are aspects of this technology that allow
Speaker 1: for unique transparency that hasn't been possible before, and let's
Speaker 1: take advantage of that. I mean, that's a wonderful thing.
Speaker 1: And that's part of why I think some people have
Speaker 1: looked at the SEC's approach in the past and have said,
Speaker 1: it's sort of strange that the SEC is taking this
Speaker 1: negative approach when there's so many aspects of the technology
Speaker 1: that we could use to really improve transparency, to improve
Speaker 1: access for people and so I hope that we can
Speaker 1: take advantage of those tools where it's appropriate.
Speaker 2: Yeah. Absolutely, Now in regards to rulemaking and working with Congress,
Speaker 2: and I know, maybe getting ahead of ourselves yet because
Speaker 2: Paul Akins is not even in office yet, but I'm
Speaker 2: assuming that you and the new incoming chair and the
Speaker 2: other commissioners are going to work more with Congress to
Speaker 2: get some better legislation through. Obviously, their FIT twenty one
Speaker 2: bill went through the House last year, a version may
Speaker 2: go through the Senate this year. I saw the Senate
Speaker 2: started a Digital Asset subcommittee. So how are you planning
Speaker 2: to work with Congress for rulemaking?
Speaker 1: Well, I think one important role that the SEC has
Speaker 1: is to work to provide technical assistance to Congress as
Speaker 1: they're thinking through different legislation. And so that's an area
Speaker 1: where we can lend our expertise just so that folks
Speaker 1: in Congress can understand how that new legislation might interact
Speaker 1: with our existing statutory and regulatory framework. And so I
Speaker 1: think that can be helpful. And then as we take
Speaker 1: steps here at the Agency to try to do what
Speaker 1: we can with our existing authority, it will become more
Speaker 1: apparent where maybe more authority where there really are regulatory
Speaker 1: gaps where either we need more authority or another regulator does,
Speaker 1: or frankly, where Congress comes in and says, you know what,
Speaker 1: we've decided this is an area where we really don't
Speaker 1: want there to be regulation, but our activities will I
Speaker 1: think shed light on where those those gaps really are.
Speaker 1: So I expect that we'll be working closely. And you know,
Speaker 1: we always we always welcome, of course input from our
Speaker 1: from from Congress and welcome the opportunity to work with them.
Speaker 2: Yeah, for sure. Now with SEC Chair Paul Atkins coming in,
Speaker 2: a change in the tone and an approach to crypto
Speaker 2: and uh, we get a pro crypto Congress, we get
Speaker 2: a propate crypto president. Do you foresee the SEC collectively
Speaker 2: dropping some non fraud cases? And I want to make
Speaker 2: sure you've been clear in that people who are doing
Speaker 2: bad activities fraud and so forth, to face the law,
Speaker 2: of course, but non fraud cases where we need Congress
Speaker 2: to act that the SEC may drop some of these cases,
Speaker 2: and it may be faster settlements in some of the
Speaker 2: smaller cases.
Speaker 1: Again, I don't want to get ahead of the new
Speaker 1: Commission in terms of what will happen I think that
Speaker 1: the litigation. Then, This has been my point all along,
Speaker 1: Trying to lead crypto policy and set crypto policy using
Speaker 1: enforcement is really very bad for a lot of reasons.
Speaker 1: One thing it does is it takes a specific set
Speaker 1: of actors or a specific actor and a specific set
Speaker 1: of facts, and it sort of defines where where policy
Speaker 1: is based on that. So we've seen that already, right,
Speaker 1: we have settlements with entities, and people all then look
Speaker 1: at those settlements and they say, well, that's what I
Speaker 1: have to do. They assume that that's what they have
Speaker 1: to do, and so it becomes sort of a de
Speaker 1: facto rule, and that really isn't the best way to
Speaker 1: write rules. Congress told us when you write a rule
Speaker 1: that's generally applicable, what you need to do is you
Speaker 1: need to go through notice and comment rulemaking. And so
Speaker 1: I don't want to let our enforcement policy drive our
Speaker 1: enforcement program drive policy anymore now than it was doing
Speaker 1: before and has been doing so far. So I think
Speaker 1: there's some difficult days ahead for all of us as
Speaker 1: we think through how to move forward.
Speaker 2: Now. I want to talk to you about ETS because
Speaker 2: the big Quininny Theoremys, Spotty tips have been a success,
Speaker 2: incredible adoption, incredible inflows, and there's an appetite for it.
Speaker 2: There have been filers for Solana xrp HBr ETFs. Unite's
Speaker 2: book last year about the SEC's approach has been there
Speaker 2: needs to be a futures market, then the approval of
Speaker 2: this bodyts. I'm curious if there's any updates on that.
Speaker 2: Do you think is going to be some deviation from
Speaker 2: needing a futures or that the futures may be under
Speaker 2: a new administration be put into place and those other
Speaker 2: all coin ETFs get approved this year.
Speaker 1: Yeah, I mean, we'll have to see what happens. I think,
Speaker 1: as you said, there's some people who have already come
Speaker 1: in with some applicants have already come in, and I
Speaker 1: think that we will deal with each of those on
Speaker 1: its unique facts and circumstances. And one of the things
Speaker 1: people do when they come in is they say, you know,
Speaker 1: here's what you've done in the past, SEC, and here's
Speaker 1: why we think, even though what we're doing is different
Speaker 1: or slightly different from what was done in the past,
Speaker 1: here's why we think you should move forward. And so
Speaker 1: there's that conversation, that dialogue that goes on about what
Speaker 1: the justification is for moving forward, and then we'll have
Speaker 1: to see what the new commission decides to do based
Speaker 1: on those facts. As I as I said at the beginning,
Speaker 1: I can only speak for myself, but I think we
Speaker 1: need to just be consistent with how we approach products,
Speaker 1: not only looking in the crypto world, but how have
Speaker 1: we approached other similar products that aren't involving crypto and
Speaker 1: just apply that same kind of rationale for.
Speaker 2: Sure, Commissioner person, I remember when we spoke early in
Speaker 2: twenty twenty four, you mentioned I think this is your
Speaker 2: last year and then your tenures up in twenty twenty six,
Speaker 2: I believe twenty five. Oh when are you? When is
Speaker 2: it a wrap up?
Speaker 1: So my tomm ends in June. But one of the
Speaker 1: one of the ways this works is you don't have
Speaker 1: to leave on the day your term ends unless they
Speaker 1: put someone in your spot, so you can hang on
Speaker 1: for a little longer, so I have a little more
Speaker 1: time to try to see some of this progress through.
Speaker 1: I hope.
Speaker 2: Well. I also is going to ask are you going
Speaker 2: to stay on? You know, can you be re assigned reelected?
Speaker 2: And I apologize, I don't know if we're beat you
Speaker 2: there yeah.
Speaker 1: I mean, you can be renominated and reconfirmed, but again,
Speaker 1: I think the way it's set up, you don't have
Speaker 1: to you can you can stay on a little longer,
Speaker 1: so we'll see what happens. But I do hope to
Speaker 1: stay around a little bit so that I can can
Speaker 1: help make a difference in a positive way in how
Speaker 1: we handle crypto, and not only crypto, but some other issues.
Speaker 1: There's there's a lot of work to be done here
Speaker 1: in the next few months, So.
Speaker 2: To confirm you're going to be here for the next
Speaker 2: four years, that's.
Speaker 1: Right, right, That is not what I said.
Speaker 2: I'm just seazing. I would love to have you stay
Speaker 2: at the SEC and you know, have your leadership and
Speaker 2: all those things part of the new administration longer. Obviously
Speaker 2: you're going to be here till June. Is there anything
Speaker 2: else you know from a crypto standpoint that you want
Speaker 2: to highlight? I know we touched on a lot, but
Speaker 2: if not, it's okay.
Speaker 1: I mean I think we really touched on things. I guess.
Speaker 1: The only other thing I would say, and I apologize,
Speaker 1: I'm getting over a cold. The only other thing I'd
Speaker 1: say is I do want people to come in right
Speaker 1: and talk to us, and I want people to come
Speaker 1: in with concrete ideas of what we can do, and
Speaker 1: so the doors will be open for people to come
Speaker 1: and do that. It's most helpful if you really have
Speaker 1: some very concrete ideas set out and come in and
Speaker 1: talk to us about that. And I think that's how
Speaker 1: we can move forward quickly, is what if people really
Speaker 1: have substance in those conversations with us. So I'm looking
Speaker 1: forward to a lot of great conversations.
Speaker 2: Awesome mission, the purse as always. Thank you so much
Speaker 2: for your insights and your leadership, and hopefully we can
Speaker 2: do this again in a coming months as things progress
Speaker 2: and legislation and all these things are making its way
Speaker 2: through Congress and new SEC Chair Paul Acting is in place,
Speaker 2: maybe some updates to the SEC website and we can
Speaker 2: talk about all those things.
Speaker 1: That sounds great, Tony, Thanks so much. It's always a
Speaker 1: pleasure bask past pass