11.16.21
Fireside Chat With Hester Peirce and Carlo di Florio – Cryptocurrency and the Future of Finance
by: Irene Yeh, BISA Staff
With so many new developments in the finance industry this past year, we must be ready to navigate an ever-changing environment and the uncertainties that come with it. During the BISA Regulatory & Compliance Summit, SEC Commissioner Hester Peirce and Carlo di Florio, the global chief services officer of ACA Compliance Group, held a Fireside Chat covering several evolving issues in the finance world.
During the Chat, Peirce provided insight and her own professional input regarding the plans that the finance industry has for new developments and how to handle changes. But perhaps the most prominent topic of discussion was something that has been on everyone’s mind in recent years: cryptocurrency.
Cryptocurrency, for the most part, is still an unknown world for many. Initially, regulators’ general reactions was to ignore the asset and deny its legitimacy. However, Peirce emphasized that this cannot continue any longer.
Peirce, affectionately referred to as ‘Crypto Mom’ for her support of the asset, stated, “Crypto is here to stay.” No longer is it a mysterious form of currency traded in a very niche market. Rather, it has evolved into almost a mainstream aspect of the finance industry.
“We cannot deny it any longer that it is becoming a real thing and will soon become part of the finance world,” Peirce added.
There are many questions about crypto, but the one that is at the forefront is, what can be done to regulate cryptocurrency?
This question is rooted in concern for clients who wish to have exposure to crypto. Right now, cryptocurrency has a “flavor of the day” environment, which makes fraud a prevalent issue.
Peirce mentions SEC Chair Gary Gensler has possible solutions. One of them includes a regulatory framework to ensure that clients have a platform they can register under to trade crypto. However, this brings up concern on how clients can even register, as there is the risk of clients trading securities amongst non-securities.
Furthermore, there are talks of government involvement. Congress may become involved by appointing the Commodity Futures Trading Commission (CFCT) as the regulators of crypto. But the chair nominee of the CFCT remarked that digital assets look like commodities, thus indicating a “regulatory turf war.”
Peirce suggested that the financial world must discuss amongst each other if they want to apply the same regulatory structure to the crypto markets like for the equity markets. If this becomes the approach, then Congress must decide who the right regulator is.
There is also the matter of stable coins, a type of crypto asset that is often used in transactions in the crypto world. Banking regulators have also started to pay attention to stable coins due to their vast growth in a short period of time. State regulators have also started to pay attention to the action, too.
Peirce's proposed solution is to give information to token purchasers, back them up with anti-fraud law, give them a three-year period to build networks and then move it out of the securities framework.
“The truth of the matter is, there is a lot of regulatory uncertainty,” Peirce said. Cryptocurrency is not a static asset, but a dynamic one. As we enter a changed finance world, we must find solutions to these uncertainties so that we can help clients accomplish their goals and ensure stable wealth management.
The November 10 Fireside Chat was an event that took place during the 2021 BISA Regulatory & Compliance Summit. We would love to hear your perspectives on cryptocurrency. Share your thoughts on LinkedIn or on Twitter and tag @BISATweets.