US risks falling behind Europe without crypto rules, warns SEC commissioner

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The US risks falling behind the EU and UK without rules for governing crypto asset markets, the Securities and Exchange Commission’s Hester Peirce has warned.

Speaking at the Financial Times’ crypto and digital assets summit, the US stock market regulator’s senior Republican member said frameworks set out by Brussels and London could be a blueprint for Washington lawmakers.

The EU has drawn up an extensive set of new rules, known as the Markets in Crypto Assets (Mica) regulation, which is expected to come into force next year. The UK earlier this year set out a sweeping new regulatory regime for crypto that aims to bring the rules governing crypto tokens in line with those already in place for traditional financial assets such as stocks and bonds.

"[The UK’s] approach is one that can serve as a model for us, Mica can serve as a model for us,” Peirce said. “I think we’re shooting ourselves in the foot by not having a regulatory regime in the US.”

In contrast to the UK and EU, the US has not developed a regime for regulating crypto assets, instead opting to issue a wave of enforcement cases against crypto activity, predominantly led by SEC chair Gary Gensler. Some of the biggest crypto firms, including lender Genesis, and exchanges Gemini and Kraken, have been targeted by the US securities regulator.

Peirce, one of five members of the SEC, has often split with Gensler over cryptocurrency regulation. Gensler has resisted crafting new rules for crypto markets, arguing that existing laws are sufficiently clear.

The SEC has also issued a Wells notice to publicly listed exchange Coinbase, warning that it was considering potential enforcement action against the crypto exchange over possible securities laws violations.

America’s crackdown on digital assets has raised questions over whether the industry will leave the US and set up in offshore jurisdictions with rules perceived as friendly to crypto business.

"You keep coming back to this question of what if people move their companies to [other jurisdictions]. The point is if we built a good regulatory regime, people would come,” Peirce said.

Speaking at the same panel, senior officials from the US Treasury and the UK’s Financial Conduct Authority said it was important for regulators to extend their oversight beyond national boundaries in order to adequately mitigate risks posed by the crypto industry.

Sandra Lee, deputy assistant secretary for the Financial Stability Oversight Council at the US Treasury, emphasised the “importance of supervisors and regulators to be able to see into affiliates and subsidiaries of certain crypto asset firms”. Sarah Pritchard, executive director of supervision, policy and competition at the FCA, said the UK’s proposed crypto rules “will bite on firms marketing to UK consumers”, adding that the regulator “will be on the lookout for firms that are not abiding by those rules”.

The FCA has previously warned consumers to be prepared to lose all their money if they invested in crypto assets.