Translation: Plain Language Blockchain

In the tumultuous waters of cryptocurrency, regulators are often seen as cold "gatekeepers," but what if the rule-makers are trying to provide you with a nautical chart to compliance land?

In this issue of “Decks in the City,” we welcomed a heavyweight guest: SEC Commissioner Hester Peirce (Pur), affectionately known as "Crypto Mom" by the community, along with Sumera, a driving force behind the crypto task force. In a deep dialogue led by "women" in pandemic response, we tore down bureaucratic labels and hit the industry's most sensitive nerves: How does the SEC utilize AI to sift through hundreds of proposals internally? How can small teams escape the quagmire of “million-dollar compliance costs”? As regulatory authority swings between the SEC and CFTC, how do entrepreneurs seek "bulletproof" long-term certainty?

This is not just a debate about the legal boundaries; it is an honest confession about "building trust." If you want to know what the future of Web3 looks like in the eyes of regulators in this age where "wallets are cold but opinions are hot," this lengthy article will unveil the true logic behind the building.

1. The Daily Life of the Crypto Task Force: From Rebuilding Trust to the "Writing" Stage

Katherine KK: Let's start with Sumera. Something we think is very important at the grassroots level, and something the audience wants to know, is: frankly speaking, what does the crypto task force — the SEC's crypto task force — do on a daily basis? What are your focuses? How many submissions have you reviewed? Can you give us more insights about your daily work?

Sumera Ununice: Thank you very much for inviting me to participate. Before we start, I want to give the SEC's disclaimer: everything I say today does not represent the views of the Commission, the Chair, other officials, or staff. These are just my personal views as the Chief Operating Officer of the Crypto Task Force.

When it comes to the crypto task force, we have done a lot. It has been over a year since we started, but like you, we hit the ground running at the very beginning, and we've been completing tasks like a fire hose ever since. One of our original missions was to rebuild trust with the industry. At that time, the environment was such that people were reluctant to talk to us. And I believe that to be effective in regulation, open channels of communication are necessary. So we worked very hard to establish these channels. We held several roundtable meetings, and you participated in one of them. This was a way to invite people back into the building to start the foundational dialogue we needed.

After establishing trust and communication channels, we issued new guidance in areas where some national actions or large-scale rulemaking (creating rules) are needed. We refer to the “Inefficient Role” — where we know we can clarify immediately, and we already have clear answers. Thus, we released different staff work statements. Now we are entering the next phase: thinking about long-term, fair actions that can be sustained regardless of how enriched the authorities become or how developers can refer back while building.

In this realm, one of the best things we can do is to fill in the existing gaps or uncertainties through rulemaking. The staff is working hard to advance this work. The task force collaborates closely with the staff. But for four years, our daily work has largely been about numerous meetings, plenty of interactions, and reviewing the hundreds of written comments we have received as submissions in response to the Commissioner's initial requests for comments. Now we are truly entering the "writing" stage: reviewing drafts of rulemaking (where possible), drafting Commission statements, and similar work. So now more time is spent in front of the screen, reviewing documents, and writing when appropriate.

Katherine KK: You have done a lot of work, and you work very hard, and we've seen results. We've presented guidance and seen the Commission's comments. Especially, as you rightly pointed out, beforehand there was a lack of communication from the authorities because there was an obvious fear of communication at that time. And we all know this is not a good way to collaborate, it is not good for anyone—whether in traditional finance or the crypto industry. So I'm glad to see this open dialogue in the industry.

2. Decision-Making Mechanism and AI Empowerment: How to Transform Roundtable Dialogues into Regulatory Guidance

Katherine KK: Today we have many big names online, and we are very happy to have you all together. Sumera just shared the day-to-day operations of the crypto task force. But you mentioned roundtable meetings, and I love those roundtable meetings because they truly reflect your emphasis on spacing and interacting with the industry. I want to ask one question: what is the internal process for transforming the content of the roundtable meetings—those dialogues and thoughts—into actual guiding opinions? Or, how do you incorporate these dialogues into your considerations? I will direct this to Pur.

Hester Peirce (Commissioner Pur): Okay. Before starting, I want to clarify: my views only represent my personal opinions as a commissioner and do not necessarily reflect the SEC or other commissioners' hints. You asked about the process of converting what we learn in the roundtable meetings into guidance. It's just one of the inputs, and a very helpful input. I find it very valuable when several people interact and respond to the same issue. Of course, the written comments we receive are also very helpful, as is all the meetings we conduct. So I believe these are all inputs that come together. I will rewatch the recordings of the roundtable meetings because I find there's a lot of content, and I want to confirm if I missed anything. So, it's essentially just one input in the overall process.

Sumera Ununice: Yes. As Commissioner Pur said, we will review them again. It’s hard to digest all the content during the meetings and come up with follow-up questions, and the advantage of these roundtable meetings is that we have recorded all of them and published them on the crypto task force’s website for people to review parts of particular interest. I know the staff does the same, which is very important—especially now, as the staff is working around rulemaking, these recordings are an excellent resource. They can go back to listen to those dialogues and then reach out to the industry experts and subject matter specialists we selected at that time.

Sumera Ununice: I only recently learned that I can directly ask AI (since this is a public site, not our internal system): “What are KK's main points on this issue? What is she most concerned about? Then tell me who the two people are with the strongest opinions on this issue and what their main arguments are.” I can really do that, and it will provide a timeline. Then I can go check or relisten to it later. Because sometimes I know someone made a certain point, and I loved how they handled it, but if I rely only on my memory, it might forever be lost in a black hole. Now with these public recordings, combined with our ability to analyze them in this polar way, it greatly enhances the impact of these roundtable meetings or other dialogues.

Katherine KK: This is fantastic. There is so much happening in the crypto space for you all. There are many "apples and oranges" in the challenges of regulating this space—NFTs, tokenized securities, L2s, etc. With the large amounts of questions you are facing next, how do you determine priorities?

Hester Peirce (Commissioner Pur): This is certainly difficult. We cannot please all the owners with our prioritization. But I think we need to first figure out what things are clearly outside our jurisdiction, and then turn to those that fall within our jurisdiction and address the ones facing technical or legal issues specifically. You will see that rulemaking is advancing, but it takes longer. So sometimes it’s about speed—what can we process quickly and what needs more time.

A currently highly interesting area is the tokenization of securities. This clearly falls within our area of responsibility, and it involves many different issues, so we are thinking about many relevant questions. Additionally, there were many various issues regarding things that were encountered during the roundtable meetings and even before the crypto task force was established. So we initially developed a list of priorities, but we are also continuously soliciting external opinions to help us adjust that list.

Sumera Ununice: Yes. In the early stages of the crypto task force, our organization was very helpful—we based it on what we could hear quickly and thought about what answers we could offer. But moving forward, the industry's participation is very important. We can get guidance from Congress while simultaneously engaging in many dialogues, and themes gradually emerge. If we hear consistent questions or concerns from multiple practitioners, we know what the market currently needs answers on. Can we address it directly? Or does it need to be considered in the rulemaking process? This external input is very important to us.

Additionally, we also receive no-action requests, but sometimes I hear the same issues repeatedly in our causal dialogues. I would say: you need to formally come forward. You will discuss it on the edges of meetings, mention it repeatedly in grand meetings, but no one formally brings it up to us. When this happens, it becomes very difficult for us to demonstrate that it should be prioritized. So, if as a practitioner or someone in the industry, you encounter issues, please make sure to formally reach out to us.

3. The Breadth of Regulation: From the Clarity Act to Token Issuance Pathways

Katherine KK: This is a very good suggestion. I want to add something related to the work you are doing and how to determine priorities. I once served as a staff attorney at the SEC, primarily in the enforcement division, but for the last nine months, I was the Chief Legal Counsel of the Office of Legislative Affairs. One of the coolest parts of that job was being able to provide technical assistance for ongoing or considered legislation in Congress. So my question is: We know Congress is moving forward with the Clarity Act, but as you said, the market needs guidance and rules. So, the SEC cannot just stand by waiting for Congress to act. How do you think about how to advance when you know this bill is still hanging in Congress? Is it particularly confrontational? How do you balance that?

Hester Peirce (Commissioner Pur): We have the authority, and Congress also wants us to use the authority we already have. So this part is relatively easy. The other part is telling everyone: some things actually do not fall within our Washington jurisdiction. If it belongs to the jurisdiction of other agencies, maybe it already does; but if you want to clarify it as belonging to our jurisdiction or that of other agencies, then Congress needs to know about that existence. What we are doing overall aligns with our congressional efforts. We have all seen drafts of the Clarity Act, so we know the general direction. I believe what I am doing genuinely helps inform broader congressional efforts. When it is in Congress's hands to write laws, we will act according to what they say. But I believe that the steps we take independently, as well as those jointly with the CFTC, will lay a great foundation for collaborative rulemaking and other cooperation.

Sumera Ununice: We are undoubtedly sensitive to Congress’s intentions. We have been watching different versions of the Clarity Act, so we know we can continue to move forward while also clearly stating that we are not working in completely gray areas. If clear provisions arise, we will accordingly adjust our work or approach.

Katherine KK: With the advancement of crypto technology, different alliances will form internally, and people have differing views on priorities. Have you observed differences between the goals and priorities of small teams versus large teams?

Hester Peirce (Commissioner Pur): It is truly very difficult for small teams because they can't afford heavy legal burdens. Even if they hire lawyers, without SEC guidance, the lawyers can't tell them how to move forward. Their funds are strained, so timelines are very tight. I do feel a certain sense of failure regarding small projects. I hope we can directly tell them what to do so they can build with peace of mind. Larger market participants are more willing to engage in policy because they do not have enough resources and burdens.

Sumera Ununice: These two categories are actually complementary. We have traditional players or older players who can contribute legal analysis or collective efforts; meanwhile, small teams can leverage the outcomes of that work. It is crucial for us to create a framework that small builders can rely on, allowing them to access the capital markets. We do not want to create an environment where seven or eight rounds of funding are needed to enter the market—we are trying to avoid that.

Therefore, a lot of the guidance we publish is designed to be broadly applicable. As we advance our rulemaking, we are very cautious in considering how this will affect different participants. “On the Crypto Road” is a great way for us to go out there. But it should also be known that we operate an open-door policy. You need special access to reach your regulators. Each of our crypto task force websites has a meeting request page where anyone can present their opinions to us.

Katherine KK: Regarding compliance pathways, token issuers should not have to consider spending $2 million and hiring a team of seven lawyers to launch their token. I wonder if you are aware of this point when creating a path for crypto to enter compliance.

Hester Peirce (Commissioner Pur): Yes, of course. I think this is precisely what we are striving to achieve in rulemaking—to make regulation proportionate to the scale of funds raised. Once you start raising large amounts of money, I think a reasonable expectation is: you should be able to hire lawyers and use part of your funds to ensure accurate disclosures. There are differences here, and we will consider the scale of the entity and the scale of funds raised, working to make the rules reasonably matched.

Sumera Ununice: I think we have been paying a lot of attention to this point when drafting proposals. But I want to reiterate that we very much need everyone's feedback on these proposals. If something is not feasible, that is the best time to provide feedback.

4. Information Disclosure and Future Vision: Transformations Brought by Smart Contracts

Katherine KK: This is more practically rational than anything else. Disclosure is also a topic that general counsels often discuss. Jesse, would you like to ask a specific question on this topic.

Jesse: Yes. One viewpoint is that as long as people are given good enough information, they can make their own choices. But in the crypto space, this may look very different because the speed of information flow is on a completely different level, and there are also transparency issues. In the crypto space, what constitutes “good information”? Is it different from the traditional financial market?

Hester Peirce (Commissioner Pur): First of all, I think the market should not wait for regulators to tell them what good information is. If you think people need certain information, you should proactively ask for it. I find that there are currently some efforts in the private sector where people sit down and think: if you want to buy a token project, what do you want to get from this project? But I think this set of information should differ from what you would want when purchasing stock in a company. And when we see issues arising, it also helps us think about what disclosures should be deliberated. However, I consistently believe that anyone buying an asset should not buy unless they have received sufficient information to assure themselves that it is safe to proceed.

Sumera Ununice: Yes, I have quite strong views on disclosure. Most of my career has been spent working on disclosures. For the crypto field, foundational disclosure issues are consistent. I think the overall approach of federal securities law is determined. What do investors need to know to determine if this investment is right for them? We continue to want to provide this information related to crypto products. One issue we have historically seen is that due to the lack of a regulatory framework, the issue of outdated information is particularly severe in a market without current requirements.

Another aspect that excites me about disclosure is when we apply smart contracts and other technologies. Currently, one of the biggest criticisms of the disclosure system is that the volume of information is complex and difficult for ordinary people to digest. Not only is it difficult to digest, but also hard to accept. With smart contracts, we can create a better framework for disclosures. I am very much looking forward to whether anyone will push this forward. Using artificial intelligence to process all the different information, thus becoming more interactive; is there an opportunity to consider whether consumers can design investment products? I see that some of our smart contracts are showcasing very exciting things.

5. Coordinating Inter-Institutional and Public Service Legacies

V: We want to talk to you about the recently announced CFTC-SEC coordination initiative. What happens if the two agencies disagree on something? For example, how to classify a token? Have you considered how to resolve such disputes?

Hester Peirce (Commissioner Pur): I believe both sides currently view this as a very necessary process to establish. Because in the past, we have all seen, if there is no mechanism for regular communication, one agency thinks a certain product belongs in their zone, while another agency says, “Wait a second, I think it belongs in my zone.” This is very destructive for the market. I believe that both sides are very committed to adopting a rational approach. Regarding whether there is a formal mechanism for dispute resolution? The key is that the leadership has a genuine commitment to establish a habit. I just don’t want us to take conflicting stances externally. I really appreciate this ongoing coordination and communication between the CFTC and SEC.

Sumera Ununice: Currently, we are conducting large-scale interactions among staff across agencies to ensure that SEC staff capabilities are aligned with those of the CFTC in dialogue, establishing relationships. Because staff tend to remain longer than the leadership, we want coordination efforts on the staff side as well.

Katherine KK: Speaking of “sustaining,” how do you operationally implement “futureproofing”?

Hester Peirce (Commissioner Pur): One way is through rulemaking because rules are more difficult than simple guidance; repealing regulations is the most enduring. But another thing I want to say is: as people increasingly use your products and services, it becomes difficult for new administrations to change it. So now is the time when you should really focus on building things.

Sumera Ununice: From the day the task force was established, I have been fascinated by this issue. There are various ways to protect it. One aspect I am particularly proud of is: this is not just an initiative of the "10th floor" (commissioners' office), but a framework collaboratively built by the entire building. When leadership changes, if the staff has already been involved in every policy department and they understand what they are doing, I think it is important not to get too hung up on “this is just crypto.” This is driven by the mission of this building, driven by the employees of this building—many of whom will still be here for a long time.

V: What do you consider the proudest aspect during your tenure at the SEC?

Hester Peirce (Commissioner Pur): Honestly, it is the people who help me do my job. These people are all-in on crypto or other work I am responsible for here. I am genuinely blown away by their talent.

Sumera Ununice: Commissioner Pur would never actively speak of her legacy because she is one of the most humble people you will ever meet. Her legacy is the standard she sets for public servants. I have never seen a person more principled and wise than her. The task force could not exist without her leadership and the trust people have in her. She has shown courage and integrity.

Katherine KK: Before we end, is there anything else you would like to convey to our audience?

Hester Peirce (Commissioner Pur): We genuinely hope to hear everyone's voice at every stage. Please continue to engage with us; it is the only way we can achieve good results. We are working hard to find the right position, and this is an iterative process.

Sumera Ununice: My message is: never give up. There will be doors, and there will be walls—this will always happen. You must keep moving forward, and you must believe in what you are creating. This is why America has become the greatest country in the world—we are not afraid to build, create, innovate, and dream of a better world than now. It all comes from builders.

Katherine KK: Thank you very much for your time and expertise. You are a huge inspiration to all owners. See you next week on "Decks in the City"!

Article link: https://www.hellobtc.com/kp/du/04/6281.html

Source: https://www.youtube.com/watch?v=JpaYtp3Fuu8