Meet the watchdog called CryptoMom


Startups and cryptocurrency workers who fight tighter regulation think they have their sample. They call it CryptoMom.

Hester Peirce, a Republican member of the Securities and Exchange Commission with libertarian propensities, has made waves with a number of opposing positions since joining the agency last January. He drew attention to the frequent votes against law enforcement and called on the SEC to moderate the way it imposes fines on companies and some individuals accused of committing an offense.

But it was the vote that launched in July – the solitary in favor of what would be the first bitcoin-related retail investment fund – that earned it the maternal moniker from traders eager to see easier access to cryptocurrency .

"Many of the crypts are completely new in the regulation of securities, and in many cases they think it's terrible," said Sara Hanks, a lawyer who leads CrowdCheck, a company that provides advice to encrypted startups on compliance with securities laws. "She was more willing to say: do not stifle innovation."

Mrs. Peirce, who has no children, has embraced her new nickname and recently told a group in San Francisco that she would be a "free-range mother", while the SEC was a "helicopter mother" who tried to protect the population from investments that seem too exotic or risky.

"[W]hat that I liked his dissent was that it came from a reasoned place. "

-Andy Bromberg, co-founder of Crypto startup CoinList, on Mrs. Peirce's vote in favor of the first bitcoin-related retail fund

Mrs. Peirce's philosophy is well known within the agency, where she voted against settlements or penalties in about 10% of all cases handled in the SEC's internal courts, according to analysis of the Wall Street Journal agency registers.

A former Republican commissioner who recently left the SEC, Michael Piwowar, has voted against sanctions or entire cases only 3% of the time, according to the analysis of the Journal, which reviewed the SEC votes from January 2016 to November 2018 The Democratic members of the SEC have voted against running settlements about 1% of the time, the figures show.

Behind the closed doors, Mrs. Peirce has sometimes questioned the SEC lawyers so aggressively that she later apologized for comments that could be seen as denigrating their work, according to people familiar with the matter. He declined to comment on these interactions.

One of these cases involved an encrypted company known as Airfox, people said, a startup that raised $ 15 million through the sale of a digital currency that the SEC said to have skirted investor protection laws. In November, Airfox agreed to pay a fine of $ 250,000 and offer money to investors. Mrs. Peirce voted against the sanction, according to SEC data.

In an original WSJ documentary, market journalist Steven Russolillo ventures into Japan and Hong Kong to explore the cryptocurrency universe. His mission: to create WSJCoin, a virtual token for the newspaper industry. Image: Crystal Tai. Video: Clément Bürge

In a more recent action, finalized on December 18, Ms. Peirce voted against the suspension from the accounting sector of a former executive of the Panasonic Corp. accused of misleading auditors on a backdated contract designed to increase revenue in a quarter. He said the SEC signed "the death sentence" for the former financial officer, excluding him from his profession for at least five years, said one of the people.

In an interview, Ms. Peirce said she would not agree with the multinational public companies when shareholders may have already been hurt by a fall in the company's stock price when frauds or bad were discovered conducted. On the other hand, he says, he is sympathetic to a new generation of entrepreneurs who are trying to apply the technology that supports bitcoin to other uses.

"I think it's okay to hold hands a little bit, to say we want you to be able to raise funds if you're not ripping anyone," Mrs. Peirce said. "We also want you to do it in accordance with our rules."

Crypto-asset developers and merchants closely analyze Commissioners' statements for what they could report on future regulations. Supportive observations can raise prices, while downward decisions can precipitate asset values. Bitcoin is down more than 80% compared to December 2017 and the total market value of all cryptocurrencies, currently equal to about $ 111 billion, decreased by 87% compared to 827 billions of dollars in January 2018.

Ms. Peirce, 48, grew up in Cleveland Heights, Ohio, where her father was a professor of economics at Case Western Reserve University. He ran unsuccessfully for the governor of Ohio on the libertarian ticket in 2006.

Bitcoin and other cryptocurrencies declined sharply in 2018, amid regulatory skepticism reflected in the SEC's refusal of what would be the first bitcoin-related retail investment fund. Mrs. Peirce's dissent in the case was the solitary vote of the agency in favor of the fund.

Bitcoin and other cryptocurrencies declined sharply in 2018, amid regulatory skepticism reflected in the SEC's refusal of what would be the first bitcoin-related retail investment fund. Mrs. Peirce's dissent in the case was the solitary vote of the agency in favor of the fund.


Luke MacGregor / Bloomberg News

Studying the economy at Case Western "has radically shaped my view of things," he said, including his views on how regulation distorts natural incentives for businesses and entrepreneurs.

After Yale University law school, she worked for the SEC for eight years and in 2008 joined the Senate banking committee as a member of the Republican staff. In 2012 he took a stance at a libertarian think tank at George Mason University, where he co-wrote a book that criticized the Dodd-Frank law, the extensive measure of financial review that passed while working in the Senate.

J. W. Verret, a law professor to George Mason, said that he mentioned the book when he interviewed in 2013 the representative Jeb Hensarling, the chairman of the House's Financial Services Committee. "He said," Oh, you mean this book? "And he pulled it out of a stand right next to his chair," Mr. Verret said. "He wrote the book about how Republicans think of the post-Dodd-Frank era."

In 2017, the White House appointed Mrs. Peirce for a SEC seat, a move that was expected in close relationship with conservative attorneys like Paul Atkins, a former commissioner who served as regulator adviser to President Trump after the elections 2016.

Barbara Roper, head of investor protection for the Consumer Federation of America's defense team, said Ms. Peirce complies with the standard for a new generation of Republican commissioners at the agency who are more aggressive and conservative than lawyers of the establishment that occupied the roles two decades ago.

"For conservatives, you are like the ideological purifier for deregulation and minimal government intervention," said Ms. Roper, who often pushes for more stringent supervision of brokers and money managers. "I think he is perfectly prepared to keep a hard line as a condition to get his vote."

Friends say that Mrs. Peirce's interest in cryptocurrency derives, in part, from her libertarian inclinations.

"For the conservatives, it is like the ideological purifier for deregulation and the minimum intervention of the government".

-Barbara Roper, head of investor protection for the Consumer Federation of America's defense group, on Mrs Peirce

The SEC has collapsed in the last year on transactions known as initial offers of coins, a method to finance cryptocurrencies. The regulator states that many ICOs were fraudulent, while most did not comply with the rules that require investors to provide audited financial statements and detailed risk information.

In cases where cryptographic resources are applied, Ms. Peirce has often questioned whether the defendants understood how their sale of tokens could be considered security, according to people familiar with the matter.

But it was Mrs. Peirce's criticism of the SEC's decision to reject an exchange-traded fund proposed by Cameron and Tyler Winklevoss, which has won its cult status among cryptic envelopes. He challenged the ESA's grounds for rejecting the product, stating that the logic, if extended to other raw materials, would have prevented the sale of exchange-traded funds that tracked the price of gold or oil.

"There is a lot of defense in the crypto community for the abolition of regulations or to ignore them, but what I liked about your dissent is that it came from a reasonable place," said Andy Bromberg, co-founder of CoinList, a startup that helps cryptography projects collect capital.

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