Speaker 1: Bloomberg Audio Studios, podcasts, radio news you.
Speaker 2: Another big story we've been covering is the executive order
Speaker 2: that President Trump signed last week that could pave the
Speaker 2: way for one four oh one K accounts to invest
Speaker 2: in crypto. Bloomberg spoke with SEC Chairman Paul Akins back
Speaker 2: in July about the possibility of private markets in retirement accounts.
Speaker 1: Here's what he had to say.
Speaker 3: We've heard a lot of input from both the investors
Speaker 3: who want access to private the private markets and to
Speaker 3: those sorts of products, and obviously from the people who
Speaker 3: are producing the products who are about to meet that demand.
Speaker 3: So but we have to do it carefully, I think,
Speaker 3: because of course, the private markets are a lot different
Speaker 3: than the public markets.
Speaker 2: And that was Paul Atkins before President Trump signed that
Speaker 2: executive order, and now that it has been signed, please
Speaker 2: to say we're joined now by SEC Commissioner hester person
Speaker 2: to discuss this topic and much more. Commissioner, great to
Speaker 2: have you with us. Let's talk a little bit about
Speaker 2: that EO. So it instructs the Department of Labor and
Speaker 2: the SEC to adjust their rules and regulations to allow
Speaker 2: those retirement accounts to invest in private assets, to invest
Speaker 2: in crypto, or at least to allow it.
Speaker 1: How will the SEC approach this? What does that checklist
Speaker 1: look like, Katie, It's great to be here.
Speaker 4: I think we've already started that process of opening the
Speaker 4: private markets to retail and thinking about ways that we
Speaker 4: can get them access in a way that's diversified, professionally managed,
Speaker 4: and consistent with their investing time frames. And so I
Speaker 4: think we'll just continue with that work.
Speaker 2: Appreciate that contact. So as we continue on and as
Speaker 2: you approach us, talk us through some of the potential
Speaker 2: risks that you're thinking about, because certainly a lot of
Speaker 2: folks on Wall Street and elsewhere have been anticipating these
Speaker 2: rule changes. But there's also a lot of concern too
Speaker 2: about putting what are risky assets in retirement accounts.
Speaker 4: Yes, I mean, I think those are legitimate concerns. What
Speaker 4: we've seen, of course, is that the public markets are
Speaker 4: dominated by several large companies, and also companies are waiting
Speaker 4: longer to go public, and so we're looking for a
Speaker 4: way for retail to get earlier access to the growth
Speaker 4: of companies, and so that's really the goal of it.
Speaker 4: But of course you want to do it in a
Speaker 4: way that makes sure that we're not just using retail
Speaker 4: as dumping ground for bad assets. So I think it's
Speaker 4: making sure again that there's professional management, that it's done
Speaker 4: in a way that's careful, and that we're paying attention
Speaker 4: to the risks associated with it.
Speaker 2: A conversation I've been having around this topic is about
Speaker 2: how this isn't as simple as switching a light switch necessarily,
Speaker 2: that you're not going to see private assets and to
Speaker 2: see crypto in retirement accounts. Overnight you said that you've
Speaker 2: already started this process on your end, you're working through
Speaker 2: that checklist. What do you see as the timeline here.
Speaker 4: Well, I mean, I think even already we have loosened
Speaker 4: SEC made restrictions that really were not based in law
Speaker 4: on the percentage of private assets that could be available
Speaker 4: in retail accounts in funds that are available to retail investors.
Speaker 4: So I think that process has begun. We have a
Speaker 4: new head of our division of Investment Management, and he's
Speaker 4: working closely with the staff and working also with people
Speaker 4: who have been thinking about how to do this in
Speaker 4: the private sector. So it's a combination.
Speaker 1: Of those things.
Speaker 2: All right, Well, appreciate you know the update there. I
Speaker 2: hope to keep talking about that, but I do want
Speaker 2: to move on and I want to talk about tokenization.
Speaker 2: That obviously another big hot topic of the moment. And
Speaker 2: when we're talking about everyday investors getting involved with tokenization,
Speaker 2: what are some of the risks in your view that
Speaker 2: could potentially come about.
Speaker 4: Well, I think there has been a lot of interest
Speaker 4: in tokenizing securities and other real world assets, and that's
Speaker 4: something that really opened up after the SEC changed its
Speaker 4: perspective on crypto. So we're seeing a lot of interest
Speaker 4: from traditional financial firms and native crypto firms, and they're
Speaker 4: different approaches that are being taken to tokenizing. So we
Speaker 4: will work with people. We're willing to work with people
Speaker 4: who are taking different approaches. But it's really important that
Speaker 4: people be very careful about disclosing what the nature of
Speaker 4: the asset is. When you tokenize something, it's still a security.
Speaker 4: If you're tokenizing a security, it may be a security
Speaker 4: with different characteristics, and that's something that needs to be
Speaker 4: conveyed to investors. And you know, it's also important to
Speaker 4: be aware of sometimes their trading restrictions or their restrictions
Speaker 4: on who can access particular types of securities, and so
Speaker 4: that's something people have to pay attention to.
Speaker 2: And that's a point that you've made in the past,
Speaker 2: that token is securities are still securities. You do have
Speaker 2: some firms I'm thinking of Robinhood, for example, rolling out
Speaker 2: token is stock trading. I believe that's taken hold in Europe.
Speaker 2: So I mean, do you see that as a potential
Speaker 2: area where you could run into some of these confrontations
Speaker 2: over firms trying to really regulate and innovate and introduce
Speaker 2: measures such as that, but potentially coming up against some
Speaker 2: of these regulations that you're putting in place.
Speaker 4: Well, without talking about any particular firms approach, I think
Speaker 4: the bottom line is that we encourage firms to come
Speaker 4: in and talk to us. We expect that there will
Speaker 4: be some different approaches taken to tokenizing, and we're looking
Speaker 4: forward to working with folks to try those different models
Speaker 4: out and see what the market's like and see whether
Speaker 4: or not tokenization of equity securities takes hold. I mean
Speaker 4: that really will ultimately be up to the market. But
Speaker 4: what our message is is that we're willing to work
Speaker 4: through different potential models with people.
Speaker 1: Well, you said something interesting there.
Speaker 2: You know, if tokenized equities take hold and it's a
Speaker 2: good reminder that this is very nascent, that we're only
Speaker 2: just seeing the first few attempts at this come about.
Speaker 2: But should these tokenized real world assets, should tokenize equities
Speaker 2: really take off? Should we expect a formal pilot program
Speaker 2: from the SEC for tokenized securities?
Speaker 4: I think the pilot program again is more likely to
Speaker 4: look like multiple pilots, with different people coming in and
Speaker 4: trying to do this in different ways. And again we're
Speaker 4: not trying to be the picker of winners and losers,
Speaker 4: but letting the market decide. So really we expect that
Speaker 4: there will be multiple options.
Speaker 2: I do also want to talk about how you interact
Speaker 2: with some of the other regulatory bodies in dc A.
Speaker 2: For a lot of folks, it's kind of like alphabet.
Speaker 1: So if you have the.
Speaker 2: SEC, you also have the CFTC, And I'm wondering how
Speaker 2: you work with the CFDC on crypto right now, if
Speaker 2: at all, what does that relationship look like.
Speaker 4: We have a good relationship with the CFTC. We've worked
Speaker 4: with them. I personally have worked with the CFTC over
Speaker 4: the years on a number of issues, including security based swaps,
Speaker 4: and so right now we're both agencies are coming off
Speaker 4: the Presidence Working Group report recommendations. We're both trying to
Speaker 4: implement those recommendations, the ones that we can start already
Speaker 4: absent market structure regulation legislation, and so we're coordinating with
Speaker 4: the CFTC on moving forward on those recommendations.
Speaker 2: Well. To that point, one of the recommendations was that
Speaker 2: crypto exchanges and other crypto and entities that are registered
Speaker 2: with the SEC that they should have to pay transaction
Speaker 2: fees the same way that traditional brokerages do.
Speaker 1: For example. Do you agree with that.
Speaker 4: I certainly understand that we need to have the fees
Speaker 4: fall on the people who are benefiting from the revenue
Speaker 4: of the fees. So I think that as the markets change,
Speaker 4: those changes should be reflected in fee revenue and Commissioner.
Speaker 2: You also brought up market structure. We know that that
Speaker 2: crypto market Structure bill is working its way through. This
Speaker 2: sense seems to be on the street that it faces
Speaker 2: a much tougher go ahead than the stable coin bill,
Speaker 2: for example.
Speaker 1: I would love to hear your thoughts there.
Speaker 4: Well. I don't prognosticate about legislation any more than I
Speaker 4: do about where the markets might go. In terms of
Speaker 4: which models of tokenization they might embrace. But I do
Speaker 4: think that the work has been really on the part
Speaker 4: of the House and the Senate is now looking at
Speaker 4: these issues.
Speaker 1: It's a very.
Speaker 4: Complicated piece of legislation to work out, but I think
Speaker 4: important and we're happy to work with people in both
Speaker 4: the House and the Senate on trying to get it
Speaker 4: to the place where it will help to guide the
Speaker 4: shaping of the industry.
Speaker 1: And just game planning here.
Speaker 2: Let's say that Congress doesn't isn't able to finish this
Speaker 2: market structure bill by November.
Speaker 1: What would that.
Speaker 2: Mean for the SEC and your approach to regulation.
Speaker 4: I think one thing that's important to underscore is that
Speaker 4: we at the SEC are not waiting for legislation to work.
Speaker 4: We have a lot of work that we can do
Speaker 4: under the existing authority that we have, and we think
Speaker 4: that the President's Working Group report urged us to take
Speaker 4: those steps, and so we've been working since January on
Speaker 4: providing guidance about where the securities laws apply and then
Speaker 4: where they do apply, helping helping firms to navigate those rules.
Speaker 4: And so that's something that we are hard at work on.
Speaker 4: We're working on rulemaking and we think that what we
Speaker 4: do will be consistent with whatever market structure legislation comes out.
Speaker 2: And Commissioner, I do want to talk a little bit
Speaker 2: about Project Crypto. I know that you know that's put
Speaker 2: together to help implement the Presidential Working Group's recommendations. How
Speaker 2: is that project going right now? What does that look like?
Speaker 1: I mean, it's going it's going very well.
Speaker 4: We're working very collaboratively with staff all across the Crypto
Speaker 4: Task Force is working collaboratively with staff across the building
Speaker 4: at the SEC. We are meeting with industry and with
Speaker 4: other interested parties. We're taking written comments as well, and
Speaker 4: we're putting that together into a package of reforms. As
Speaker 4: I said, we've already gotten some guidance out the door,
Speaker 4: but we are hoping to get some rulemaking, proposed rulemaking
Speaker 4: out the door.
Speaker 1: As well well.
Speaker 2: Commissioner, we really appreciate you taking the time to speak
Speaker 2: with us today. That is SEC Commissioner Hester Purce