The mother of Crypto Assets, Peirce: "Tokenization" has become the top focus of SEC regulation.

Hester Peirce, a commissioner of the U.S. Securities and Exchange Commission, known as the “mother of cryptocurrencies,” stated on Thursday at the Privacy Summit in Washington, D.C. that tokenization is the agency's “current focus.” She revealed that the areas of interest for the SEC include token issuance rules, transaction composition guidelines, and issues related to crypto assets custody, and they are working with Congress to draft legislation for comprehensive regulation of the digital asset industry.

Mother of Crypto Assets Reveals SEC's New Priorities

On Thursday, Hester Peirce stated that the SEC's areas of concern are very broad, including token issuance rules, trading composition guidelines, and issues related to Crypto Assets custody. She mentioned that the SEC is working with Congress to draft legislation for comprehensive regulation of the digital asset industry.

The mother of cryptocurrencies, Peirce, also stated that tokenization is the “current focus of the SEC.” With major companies seeking to put stocks on the blockchain, tokenization has fully emerged. Last month, Nasdaq applied to the SEC for permission to trade tokenized securities.

SEC Crypto Assets Regulation Three Major Focuses:

Token issuance rules: Clarify which Tokens are considered securities and how to issue them in compliance.

Guide to Transaction Composition: Defining what constitutes a Crypto Assets transaction to protect investors.

Custody Issues: Regulate cryptocurrency custody institutions to prevent the misappropriation of client assets.

This comprehensive regulatory framework stands in stark contrast to the enforcement priority strategy of former Chair Gary Gensler. The remarks of crypto mother Peirce indicate that the new SEC is shifting from “crackdown” to “building.”

Government shutdown freezes ETF approval process

However, all of this is now on hold as the U.S. government has entered its second week of a shutdown. Just as multiple cryptocurrency exchange-traded funds (ETFs) were preparing to receive SEC approval, the government shutdown occurred.

When The Block inquired about the government shutdown and the situation with ETFs, the mother of cryptocurrencies, Peirce, stated, “Almost nothing has been done.” This statement reveals the actual impact of the government shutdown on the crypto industry. Many anticipated ETF approvals, policy guidance, and regulatory clarifications have been stalled due to the government shutdown.

The government shutdown not only affects ETF approvals but also delays the legislative collaboration between the SEC and Congress. The comprehensive regulatory bill for the digital assets industry mentioned by Peirce cannot be advanced now. If the shutdown is prolonged, it may miss critical approval windows, impacting the development timelines of multiple crypto projects.

SEC's Attitude Takes a 180-Degree Turn: From Enforcement to Collaboration

Since the new president's administration took office, the SEC's attitude towards Crypto Assets has been completely different from that of the Biden administration. Former SEC Chairman Gary Gensler called for Crypto Assets companies to register with the agency and stated that most Crypto Assets are securities, prosecuting multiple entities in the process. Subsequently, as part of its newly established Crypto Assets special working group, the SEC held a roundtable meeting, launched the “Crypto Assets Projects,” and dropped several investigations.

The core figure behind this attitude shift is the mother of Crypto Assets, Peirce. She has long criticized Gensler's enforcement priority strategy, arguing that this approach stifles innovation and lacks legal clarity. Peirce advocates for regulating the encryption industry through clear rule-making rather than ex-post enforcement.

The new SEC roundtable is a manifestation of this new approach. By inviting industry participants to engage in dialogue, the SEC seeks to understand the practical workings of encryption technology and the needs of the industry. This collaborative regulation stands in stark contrast to the adversarial enforcement of the Gensler era.

Financial Privacy: The Core Concern of the Mother of Crypto Assets

On Thursday, at the Privacy Summit in Washington D.C., the mother of cryptocurrency, Peirce, also talked about the necessity of privacy. In August of this year, Peirce emphasized the importance of financial privacy in a speech and urged the government to “actively defend people's right to private lives.” In that speech, Peirce mentioned the Fourth Amendment multiple times, which protects people from unreasonable searches by the government.

“We also do not want to live in a world where the government controls information,” said the mother of cryptocurrency, Peirce, on Thursday. “What I mean is, we have already seen in many places that government power has been abused for improper purposes. So we really need to consider how to protect ourselves.”

This emphasis on financial privacy is extremely rare in the current regulatory environment. Most regulators are focused on anti-money laundering and counter-terrorism financing, often at the expense of personal privacy. Peirce's position shows that she believes this balance has been overly tilted and needs to be recalibrated.

Rethinking AML and KYC: Regulatory Challenges Brought by Crypto Assets

She stated that cryptocurrency may provide a way to rethink the Bank Secrecy Act as well as anti-money laundering (AML) and know your customer (KYC) rules. “I am actually quite optimistic because I think cryptocurrency has sparked a lot of similar questions again, as we are trying to figure out—how to break the Bank Secrecy Act, anti-money laundering laws, and the KYC framework on something that has peer-to-peer elements,” Peirce said. “So I think this really gives us a chance to rethink the whole thing.”

The mother of Crypto Assets, Peirce, raised questions about the Bank Secrecy Act, AML, and KYC, touching on the core contradictions of crypto regulation. These regulations were originally designed for traditional banking systems, assuming that all financial transactions occur through centralized institutions. However, the peer-to-peer nature of Crypto Assets challenges this assumption.

In decentralized finance (DeFi), transactions can occur directly without intermediaries. This structure makes traditional KYC and AML monitoring challenging. Regulators face two options: either ban decentralized finance or redesign the regulatory framework to accommodate new technologies.

Peirce chose the latter. She believes that Crypto Assets provide an opportunity to rethink financial regulation, finding a better balance between combating crime and protecting privacy. This mindset explains why she is referred to as the mother of Crypto Assets—she not only supports the crypto industry, but more importantly, she understands the fundamental challenges that encryption technology poses to the regulatory framework.

However, this rethinking faces significant resistance. Stakeholders, traditional financial institutions, and conservative regulators may oppose changes to the existing system. Whether Peirce's optimism can be translated into actual regulatory reform remains to be seen.