'Crypto Mom' Hester Peirce admits flaws in SEC crypto crackdown

Hester Peirce, known as "Crypto Mom," addressed flaws in the U.S. Securities and Exchange Commission's (SEC) enforcement actions during a congressional hearing. 

Speaking before the House Financial Services Committee, Peirce admitted that the SEC proceeded with enforcing crypto regulations despite legal uncertainties, criticising this approach as detrimental to the agency's integrity. 

“We knew ahead of time that there were legal questions about whether we have the authority to do what we did, but we moved forward,” Peirce stated. 

This two-day session, which included SEC Chair Gary Gensler, scrutinised the agency's actions in regulating the crypto industry. 

U.S. Representative Tom Emmer accused Gensler of leading a "rogue campaign" against the crypto sector, alleging that the SEC used enforcement tools to target firms willing to comply with regulations. 

Emmer emphasised the confusion caused by the SEC’s unclear guidelines and the agency’s lack of accountability. 

In defense, Gensler referenced court rulings and the Howey test, stating that the SEC’s actions are legally sound. 

He also raised concerns about cybersecurity risks in the crypto space, particularly regarding exchange-traded funds (ETFs) due to their concentrated nature. 

Despite Gensler's defense, Emmer’s accusations regarding the SEC's inconsistent regulatory approach highlighted broader concerns about regulatory overreach. 

Research by Paradigm revealed that the SEC has initiated 171 enforcement actions against the crypto industry since Gensler assumed office in April 2021. 

Brendan Malone, Policy Manager at Paradigm, noted that under Gensler’s leadership, the SEC has increasingly used court cases to define its regulatory stance rather than creating clear rules. 

He added that 92% of SEC actions under Gensler involved registration violations, a marked increase compared to previous SEC chairs.