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The SEC has 'failed' to give crypto industry clarity on regulation: Digital Currency Advocate

Chamber of Digital Commerce Founder and President Perianne Boring joins Yahoo Finance Live to discuss the future of crypto regulation.

Video Transcript

- I want to turn to kind of a larger discussion around the regulatory frontier. As we've seen, of course, SEC chair Gary Gensler is one man. There are other commissioners to take into account here, as we did last week, Hester Peirce joining us for a little bit, talking about her dissatisfaction with the way that the SEC has been dragging their feet when it comes to regulating crypto. Take a listen to just a piece of our discussion from last week.

HESTER PEIRCE: It is disconcerting to me that, for three years now, I've been asking for regulatory clarity, and we can't seem to provide any. And so I think this is really becoming a huge barrier to this industry being able to develop in a way that's safe, but also in a way that allows innovation to happen. And it's a real shame to me that we are not-- not just taking up the mantle as regulators to develop a regulatory framework.

- So joining us now to broaden out the discussion on what the regulations look like when it comes to crypto, I'm happy to welcome back in to the show Perianne Boring, Chamber of Digital Commerce founder and president here with us once again. And Perianne, I mean, when we look at it, you know, you heard there from Commissioner Peirce talking about the need for regulation. It sounds like Congressman Patrick McHenry was really backing that take in this Safe Harbor Bill that would kind of let companies not-- let them kind of not be afraid of the SEC cracking down on them when it comes to raising funds and creating more guardrails for companies to follow. I mean, you've been watching the way that this has evolved for quite some time. What do you make of the progress in regulations coming out of DC now?

PERIANNE BORING: Yeah. Well, I absolutely love that Commissioner Peirce joined the interview from her car. It's truly a testament to how hard she has been working as an advocate for the blockchain space. And she's absolutely right. We do not have clear, defined regulations on when a digital asset is a security and when it is not. This is not just me saying this. Hester Peirce has said this. And we also have-- I would guess there's about 30 members of Congress who have either sponsored or introduced legislation to address this very issue.

So because the SEC has failed to give the industry the clarity that it needs, Congress is now stepping in. And we saw that again yesterday. Ranking member of the House Financial Services Committee Patrick McHenry introduced a bill that would create a safe harbor for digital tokens. And it mirrors the proposal that Hester Peirce has developed. She also has a safe harbor, but the SEC has yet to bring that forward for rulemaking. We are continuing to urge them to do so. And Congress is now stepping into the conversation.

- Yeah, and I guess, you know, a lot of it speaks to how quickly this stuff moves. Obviously, DC doesn't move that fast, so they're kind of catching up in what's really going on here. And I guess, you know, you might have people watching this all play out and say, all right, Bitcoin and Ethereum got to that kind of promised land of not being seen as a security. There's promise that some of these other projects might be able to do the same, as well. But it's a very important distinction when it comes to being able to bring new money in to support these projects. I mean, what maybe still needs to be figured out there? Because the SEC has not been as clear as some people would have liked.

PERIANNE BORING: Yeah, so in the clip that was shown earlier, Chair Gensler talked about this kind of four-pronged-- you know, the Howey test, and reliant on the efforts of others being one of those four prongs to decide if something as a security or not. Where there's been a lot of confusion is there is a speech given by Director Hinman a few years ago, a famous speech when Gary met-- when Gary met [INAUDIBLE], something like that. He said it is possible for something to be introduced as a security and then, over time, become decentralized or functional, and then it would no longer be a security. It would then be a commodity. So, OK, great, but what is that?

And we still don't know what that looks like. In the meantime, we're seeing enforcement-- we're seeing a significant amount of enforcement activity across the ecosystem, and all the lawyers are left to read the tea leaves to really understand what the rules to the road are. So this regulation by enforcement is not good for industry. It's not good for the SEC, either. And ultimately, we need better clarity. We need defined rules and regulations on when a token is a security and when it's not. The SEC has the jurisdiction to do that. Hester Peirce's safe harbor would be a great step in the right direction, or Congress could pass a law, although that's a much larger feat to get accomplished, to go through the legislative process.

- Yeah, which could be a blessing and a curse, I suppose, you know, if SEC-- if Gary Gensler is saying, look, you know, it's Congress, not us that's going to ban crypto, we've seen how hard it is for anything to get through Congress on the crypto front, so maybe that could be good. On the flip side, though, when you talk about why Congress now might care, though, it's because a lot of money, which would support jobs and other things in terms of growth here in the US, may be getting locked out because of some of that confusion. And that's when they start to care.

I mean, how big is that, though? How true is it that maybe some investment would get locked out or that these jobs would go overseas, seeing as a lot of them seem pretty specialized? And as big as the market is, it doesn't take a lot of developers, I suppose, to work on some of these things.

PERIANNE BORING: This is an unbelievably huge issue. Just two weeks ago, I attended the Digital Asset Summit in New York. It's one of the first time the industry really was able to get back together in an in-person conference. And I caught up with a lot of lawyers that I work with, and the number one thing that I was hearing from the legal community that is representing projects in this space is what they are spending their time on is helping American entrepreneurs who want to build in the cryptocurrency and the blockchain technology space structure their companies and their projects so they're completely geofenced outside of the US.

How sad and completely disappointing is that, that an American entrepreneur can't offer their own products and services to people in the country they live on because they don't understand the rules to the road and they don't-- they don't want to be out of compliance? This industry is a law-abiding industry. This industry is filled of really amazing people who want to follow the rules. It's not worth it to them to be outside of the law, and so they're just choosing to take their businesses elsewhere. This is a huge issue, and we cannot understate. And we need to take into account the opportunity cost of getting regulations wrong.

- Yeah. In the meantime, it has been fascinating to watch kind of the price appreciation here in Bitcoin and Ether relative to some of those alt coins that had been high flyers as we talk more about regulation. Of course, Bitcoin and Ether have less questions when it comes to regulation, but interesting to watch. And Perianne Boring, Chamber of Digital Commerce founder and president, always love having you on. Appreciate you taking the time once again.