Statement Summary
The SEC’s fifth roundtable, titled “DeFi and the American Spirit,” highlights the Commission’s proactive approach towards decentralized finance (DeFi) regulation under the Crypto Task Force. Drawing parallels to Lewis and Clark’s exploration of the uncharted Louisiana Territory, the SEC aims to navigate the complexities of DeFi, which fosters direct transactions between individuals without centralized intermediaries. Reflecting on past opaque regulatory practices that deterred innovation, the SEC emphasizes the importance of public input in achieving high-quality regulation. Today’s discussions will unveil insights on DeFi development and regulatory challenges, striving to balance investor protection and market efficiency as the SEC adapts to new financial landscapes.
Original Statement
Good afternoon and thank you to the panelists and attendees today for the Commission’s fifth roundtable organized by the Crypto Task Force, entitled “DeFi and the American Spirit.” Reflecting on the “American Spirit” brings to mind the expedition of Merriweather Lewis and William Clark. About 220 years ago on May 14, 1804, Lewis and Clark set out to explore the new Louisiana Territory, purchased the prior year by President Thomas Jefferson. The size of the United States had doubled overnight, but there were no reliable maps or established routes through the new land. Despite this daunting challenge, Lewis and Clark entered the wilderness to carry out their mission.
While perhaps not nearly as fraught with personal danger, the Commission is similarly navigating through challenging new terrain and plunging into the regulatory wilderness under the leadership of Commissioner Peirce and the Crypto Task Force. While the Commission’s tools – such as roundtables, public consultation, and economic analysis – may be different, I am confident that our expedition can succeed in updating our rulebook to open up new opportunities for American investors and businesses.
The SEC’s treatment of decentralized finance and other emerging technologies over the past four years was not conducive to regulatory transparency and discouraged entrepreneurs and those developing DeFi from engaging with the Commission. However, that approach has recently changed under the Crypto Task Force, which is charged with coordinating the Commission’s effort to find answers to many pressing questions. Thus far, they have changed the SEC’s posture on crypto, embraced difficult regulatory questions, and promoted transparency by engaging with the market participants driving innovation and change.
This SEC is committed to high quality regulation. High quality regulation takes time and administrative processes matter. For those who are involved in the development of DeFi, please be patient and work with the Commission and its staff towards achieving the best possible outcome.
Although I am uncertain as to what “perfect regulation” may look like, the path towards it begins with seeking input from the public. This journey towards regulatory clarity will likely be frustrating, and may move in fits and starts. However, by learning from DeFi innovators and advocates, the Commission has a better chance at regulating securities transactions involving DeFi and protecting American investors who utilize decentralized financial services and products.
Today’s participants will provide knowledge and insight about DeFi’s development and the existing regulatory barriers preventing growth. Such contributions will help the Commission attempt to strike the proper balance between its role as a regulator and its mandate to foster competition, efficiency, and capital formation.
In DeFi, there is a new landscape of opportunities. People can transact directly with each other without relying on banks or other centralized intermediaries. The Commission should not refrain from engaging in oversight of novel areas simply because it involves thinking outside the existing framework. The legacy regulatory regime under the federal securities laws presupposes the existence and necessity of numerous intermediaries. I look forward to hearing from today’s panelists as to whether such presumptions remain necessary.
For example: Lewis and Clark’s journey took time to complete and carved out an important path to facilitate westward expansion. In so doing, they provided a valuable contribution to American progress. Today’s roundtable reflects the SEC’s commitment to continued progress and its willingness to consider the role of emerging technologies.
As the Commission continues to move through the regulatory wilderness, it should remain true to its mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation in its efforts to respond to market innovation. Thank you and I look forward to the conversation.
[1] My remarks today reflect my views as an individual Commissioner and not necessarily the views of the full Commission or my fellow Commissioners.
[2] See e.g., SEC.gov | Tokenization of Real-World Assets
