Commissioner Hester Peirce Insights On ICOs and ETFs


The US Securities and Exchange Commissioner Hester Peirce wants the commission to change its perspective on Initial Coin Offerings and crypto backed Exchange Traded Fund. Speaking at the University Missouri School of Law, she explored the SEC’s duty of protecting investors while promoting innovation.

At the same time, she analyzed the different angles of viewing ICOs and how the commission has approached different issues regarding ETF proposals. In her approach to these issues, she recommends that the SEC should develop new methods and approaches to the way it handles the crypto space.

Regulator And Entrepreneur Scuffle

She began her speech by revisiting the ongoing scuffle between regulators and entrepreneurs. Commissioner Peirce was concerned that regulators, gave more interaction time to people already established in the financial sector. Most of the time, It’s the large companies that have established relationships with the commission and have teams formulated for dealing specifically with regulators.

Therefore, new entries are bound to stir conflict. Regulators tend to be skeptical about changes in the industry based on the unforeseen consequences and difficulties to understand where they fit into the existing legal frameworks. As a result, ideas being brought forward are being aborted before they see the light of day.

Ditch The Howey Test

Commissioner Peirce however mentioned that although the society is eager and willing to implement new and emerging technologies, innovations are not always a benefit. It often hurts some economic aspects and the commission, in such cases is obligated to safeguard. In light of this obligation, Peirce suggests revisiting these frameworks and policies on the onset of the advancement of cryptocurrency and Blockchain.

Furthermore, there should be room for innovation which shouldn’t compromise the objectives of security laws such as investor protection, facilitation of capital formation and the maintenance of fairness, order, and efficiency in the markets. And the best way to do this is overhauling how SEC evaluates ICOs.

At the moment, the SEC uses the Howey test in determining whether a project is under guidelines of an investment contract. Although the security includes token offerings, Peirce feels that the test doesn’t fully offer insights regarding security regulations and ICOs. Besides, the fact that token offering doesn’t perfectly match traditional security offering is another good reason to ditch the system.

SEC Needs An Overhaul

Peirce also expressed her fears that SEC regulations are often rigid and this does stifle innovation. She used the example of Basis which had to shut down and refund $133 million due to difficulty in complying with regulations. She didn’t dive deeper into the particular issue but said she would pay close attention to the legitimate projects that are hindered by regulatory frameworks such as ETFs.


It’s no doubt, Commissioner Peirce is critical on the SEC’s approach to handling crypto backed ETFs. She reiterated the same concerns saying that these approaches are often merit-based and centered on SEC’s judgment rather than by expert and investor opinion. They desperately need an overhaul.

She concluded by saying that the same way the commission judges investors when they jump blindly into anything crypto, is the same way the commission runs away from anything crypto. The commission shouldn’t define to investors what their investment preferences should be.

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