SEC Commissioner Hester Peirce and President Trump's crypto advisor, Patrick Witt, have both publicly discussed the ongoing legislative efforts to establish a clear regulatory framework for the cryptocurrency market in the United States, focusing on the proposed CLARITY Act.
Commissioner Peirce, in a recent discussion, acknowledged that creating a "clear and workable legal framework" is a long and difficult process but stated that the crypto market structure bill progressing in Congress provides an important foundation. She emphasized the difficulty of drafting and passing such comprehensive legislation through consensus, based on her previous Senate experience.
Peirce addressed the critical debate over regulatory jurisdiction, asserting that tokenized securities remain under the SEC's purview: "When you tokenize a security, it’s still a security." However, she argued that most crypto assets are commodities and should be regulated by the Commodity Futures Trading Commission (CFTC), stating, "This is not our area of expertise, and we don’t want to spend our time there." She noted that while companies offering tokenized shares should follow the same basic rules as traditional issuers, technology necessitates a rethinking of some regulations.
Peirce also commented on the trend toward 24/7 trading, highlighted by news of the NYSE working on a blockchain-based platform for tokenized stocks and ETFs. She called this a positive development for global investors but raised operational questions about handling volatility pauses in a non-stop market.
On enforcement, Peirce stated the SEC will continue to combat malicious actors but criticized retroactive rulemaking: "Making up and applying rules after the fact is extremely unfair. The right thing to do is to write clear rules first, and then impose sanctions on those who violate them."
Simultaneously, Trump's crypto advisor Patrick Witt expressed strong confidence that the U.S. Senate will eventually pass a crypto market structure bill. He warned against the industry stance of "no bill is better than a bad bill," arguing that legislation is inevitable. Witt stressed that the current political landscape—with a pro-crypto president, Republican control of Congress, and experienced regulators—offers a rare opportunity to pass favorable legislation.
Witt warned that delaying the bill could allow Democrats to draft harsher rules, especially following a potential financial crisis. He criticized the idea of holding out for a perfect bill, arguing that "perfect should not be the enemy of the good" and that accepting compromises now is better than risking punitive legislation later. His comments reflect growing frustration with companies like Coinbase, which have withdrawn support from the CLARITY Act over certain provisions.
The CLARITY Act, which has already passed the House, aims to provide regulatory clarity by defining terms like "digital asset" and "digital commodity" and delineating jurisdiction between the SEC and CFTC. The SEC would oversee securities, while the CFTC would regulate commodities and trading platforms. The bill includes provisions for tokens to transition from securities to commodity status upon achieving sufficient decentralization, registration requirements for exchanges under the CFTC, and lighter regulatory burdens for mature blockchain networks. It also allows projects to raise up to $75 million annually without full SEC registration if they meet decentralization milestones.
Despite its design, the bill faces criticism from some consumer advocates and Democratic lawmakers who argue it weakens investor protections and favors industry interests. Witt believes these debates underscore the need for compromise and that passing the bill under current favorable conditions is crucial for the long-term stability of the crypto market.
