• Peirce wants US investors to have access to a wider range of investing products, including a bitcoin ETF.
  • Regulators continue to flag cryptocurrency as a concern for money laundering, and there’s no sign of that letting up anytime soon.

Allegations of regulators overstepping their boundary and also not doing enough were the parallel themes at The B-Word’s regulatory panel Wednesday afternoon. 

SEC Commissioner Hester Peirce, called the “crypto Mom” by some for her embrace of the digital assets industry, said that regulators were coming down too harshly on the crypto industry, forcing it to play by a stricter set of rules than others.

In contrast, Mike Mosier, director of the Financial Crimes Enforcement Network (FinCEN) expressed concern regulators were not doing enough to address the role bitcoin can play in money laundering and should do something before before “a major event” occurs. 

Canadian envy

Canadian traders, and Americans with access to the Toronto Stock Exchange, have been able to buy shares of a number of listed bitcoin ETFs since February.

Of chief concern to regulators in Ontario was the quality of custody solutions available to the market. Their doubt that investment-grade solutions were available cancelled attempts in 2017 to list an ETF.

“I think that they were right to have all those concerns in 2017. The space is very different three years later than it was back then,” Brian Mosoff, CEO of Ether Capital, which acted as a technical consultant to Purpose Investments which listed one of the first bitcoin ETFs, told Blockworks in an interview in February. “The closed-end funds were in the market long enough and proved the custodians weren’t going to get hacked.”

Fast forward to 2021, and Peirce doesn’t see any technical or infrastructure reason to delay or cancel these ETF applications. It’s more about the regulator not letting the ‘average American’ have access to something it deems risky and complex. 

“I would never have imagined that I would be in this situation where we would not yet have approved one and other countries are moving ahead,” Peirce said during the panel. “We should view it as trying to give people the widest range of options possible.”

Peirce said that the SEC shouldn’t be a “merit regulator”, determining if an investment product is good or bad because this mindset actually denies the market opportunities that would have been proven profitable. 

“We shouldn’t be in the business of deciding whether something is good or bad, an investor is thinking of their entire portfolio, and sometimes we’re thinking in one-off terms of a particular product standing on its own,” she said.

However, Peirce does acknowledge that crypto — with its wild market gyrations — does present more risk than a traditional equities backed ETF, but it’s up to the consumer to assess their risk tolerance and make the investment decision for themselves. 

“You have to be careful and think about whether you can afford to lose that money and consider what your risk tolerance is,” she said, mentioning that the idea of accrediting investors needs to change so that more people have access to high-yield opportunities such as private equity sales for startups. 

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    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.