Why SEC's 'Crypto Mom' Thinks Gensler's DeFi Stance Threatens First Amendment Protections

Hester Peirce, a Commissioner at the Securities and Exchange Commission, has criticized agency Chair Gary Gensler’s recent proposals to include decentralized finance (DeFi) protocols under the umbrella of “exchange” in a new speech. 

What Happened: Peirce, popularly known as “Crypto Mom,” said last week that such a change would be counterproductive and only serves as a way to force centralization and stagnation. 

“Stagnation, centralization, expatriation, and extinction are the watchwords of this release,” she said, adding, “Rather than embracing the promise of new technology as we have done in the past, here we propose to embrace stagnation, force centralization, urge expatriation, and welcome extinction of new technology. Accordingly, I dissent."

Peirce argued the SEC’s proposal could violate First Amendment protections by categorizing blockchain ecosystems as part of a "group," creating ambiguity about their speech rights.

In her speech, she asserted, “The release’s ambiguity undermines fundamental First Amendment protections. Because the release makes everybody involved in the relevant blockchain ecosystem part of a ‘group,’ it creates significant ambiguity around what speech requires government pre-approval, which will unavoidably chill constitutionally-protected speech.”

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The Solution: Peirce urged the SEC to remain open to the idea that it will need to tweak its rules to accommodate new technologies, something she says it understood in the 1990s.

She notes that the SEC’s proposal signifies an era where cutting-edge businesses may be locked out as they can’t conform to the existing regulatory mandates.

“A Commission serious about regulating — and not destroying — this market would reflect on this near unblemished record of regulatory failure and do something about it,” she emphasized.

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