WEBVTT - SEC's Hester Peirce Talks Tokenization, Bitcoin in 401(K) 

0:00:02.759 --> 0:00:08.119
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news you.

0:00:08.240 --> 0:00:10.840
<v Speaker 2>Another big story we've been covering is the executive order

0:00:10.880 --> 0:00:13.840
<v Speaker 2>that President Trump signed last week that could pave the

0:00:13.880 --> 0:00:17.480
<v Speaker 2>way for one four oh one K accounts to invest

0:00:17.480 --> 0:00:21.079
<v Speaker 2>in crypto. Bloomberg spoke with SEC Chairman Paul Akins back

0:00:21.079 --> 0:00:25.320
<v Speaker 2>in July about the possibility of private markets in retirement accounts.

0:00:25.520 --> 0:00:26.520
<v Speaker 1>Here's what he had to say.

0:00:27.480 --> 0:00:31.600
<v Speaker 3>We've heard a lot of input from both the investors

0:00:31.680 --> 0:00:36.159
<v Speaker 3>who want access to private the private markets and to

0:00:36.360 --> 0:00:39.959
<v Speaker 3>those sorts of products, and obviously from the people who

0:00:40.000 --> 0:00:44.960
<v Speaker 3>are producing the products who are about to meet that demand.

0:00:45.479 --> 0:00:47.720
<v Speaker 3>So but we have to do it carefully, I think,

0:00:47.760 --> 0:00:50.160
<v Speaker 3>because of course, the private markets are a lot different

0:00:50.200 --> 0:00:51.280
<v Speaker 3>than the public markets.

0:00:53.680 --> 0:00:56.880
<v Speaker 2>And that was Paul Atkins before President Trump signed that

0:00:57.000 --> 0:01:00.360
<v Speaker 2>executive order, and now that it has been signed, please

0:01:00.400 --> 0:01:03.720
<v Speaker 2>to say we're joined now by SEC Commissioner hester person

0:01:03.760 --> 0:01:07.240
<v Speaker 2>to discuss this topic and much more. Commissioner, great to

0:01:07.319 --> 0:01:09.839
<v Speaker 2>have you with us. Let's talk a little bit about

0:01:09.880 --> 0:01:12.560
<v Speaker 2>that EO. So it instructs the Department of Labor and

0:01:12.560 --> 0:01:16.399
<v Speaker 2>the SEC to adjust their rules and regulations to allow

0:01:16.440 --> 0:01:20.240
<v Speaker 2>those retirement accounts to invest in private assets, to invest

0:01:20.600 --> 0:01:22.280
<v Speaker 2>in crypto, or at least to allow it.

0:01:22.640 --> 0:01:25.840
<v Speaker 1>How will the SEC approach this? What does that checklist

0:01:25.840 --> 0:01:28.880
<v Speaker 1>look like, Katie, It's great to be here.

0:01:29.080 --> 0:01:32.000
<v Speaker 4>I think we've already started that process of opening the

0:01:32.160 --> 0:01:35.679
<v Speaker 4>private markets to retail and thinking about ways that we

0:01:35.720 --> 0:01:41.000
<v Speaker 4>can get them access in a way that's diversified, professionally managed,

0:01:41.240 --> 0:01:46.880
<v Speaker 4>and consistent with their investing time frames. And so I

0:01:46.880 --> 0:01:49.080
<v Speaker 4>think we'll just continue with that work.

0:01:50.160 --> 0:01:54.680
<v Speaker 2>Appreciate that contact. So as we continue on and as

0:01:54.720 --> 0:01:57.280
<v Speaker 2>you approach us, talk us through some of the potential

0:01:57.360 --> 0:02:00.440
<v Speaker 2>risks that you're thinking about, because certainly a lot of

0:02:00.440 --> 0:02:03.560
<v Speaker 2>folks on Wall Street and elsewhere have been anticipating these

0:02:03.640 --> 0:02:06.480
<v Speaker 2>rule changes. But there's also a lot of concern too

0:02:06.560 --> 0:02:10.440
<v Speaker 2>about putting what are risky assets in retirement accounts.

0:02:11.639 --> 0:02:14.760
<v Speaker 4>Yes, I mean, I think those are legitimate concerns. What

0:02:14.800 --> 0:02:18.000
<v Speaker 4>we've seen, of course, is that the public markets are

0:02:18.639 --> 0:02:22.400
<v Speaker 4>dominated by several large companies, and also companies are waiting

0:02:22.440 --> 0:02:25.400
<v Speaker 4>longer to go public, and so we're looking for a

0:02:25.440 --> 0:02:28.760
<v Speaker 4>way for retail to get earlier access to the growth

0:02:28.800 --> 0:02:31.639
<v Speaker 4>of companies, and so that's really the goal of it.

0:02:31.720 --> 0:02:33.240
<v Speaker 4>But of course you want to do it in a

0:02:33.240 --> 0:02:37.240
<v Speaker 4>way that makes sure that we're not just using retail

0:02:37.919 --> 0:02:41.080
<v Speaker 4>as dumping ground for bad assets. So I think it's

0:02:41.680 --> 0:02:44.799
<v Speaker 4>making sure again that there's professional management, that it's done

0:02:44.840 --> 0:02:48.280
<v Speaker 4>in a way that's careful, and that we're paying attention

0:02:48.360 --> 0:02:50.200
<v Speaker 4>to the risks associated with it.

0:02:50.720 --> 0:02:54.000
<v Speaker 2>A conversation I've been having around this topic is about

0:02:54.000 --> 0:02:57.720
<v Speaker 2>how this isn't as simple as switching a light switch necessarily,

0:02:57.760 --> 0:03:00.240
<v Speaker 2>that you're not going to see private assets and to

0:03:00.240 --> 0:03:04.079
<v Speaker 2>see crypto in retirement accounts. Overnight you said that you've

0:03:04.120 --> 0:03:07.040
<v Speaker 2>already started this process on your end, you're working through

0:03:07.400 --> 0:03:14.359
<v Speaker 2>that checklist. What do you see as the timeline here.

0:03:12.639 --> 0:03:17.040
<v Speaker 4>Well, I mean, I think even already we have loosened

0:03:18.360 --> 0:03:21.919
<v Speaker 4>SEC made restrictions that really were not based in law

0:03:22.160 --> 0:03:26.720
<v Speaker 4>on the percentage of private assets that could be available

0:03:26.760 --> 0:03:33.239
<v Speaker 4>in retail accounts in funds that are available to retail investors.

0:03:33.280 --> 0:03:36.640
<v Speaker 4>So I think that process has begun. We have a

0:03:36.720 --> 0:03:39.400
<v Speaker 4>new head of our division of Investment Management, and he's

0:03:39.440 --> 0:03:44.160
<v Speaker 4>working closely with the staff and working also with people

0:03:44.240 --> 0:03:46.120
<v Speaker 4>who have been thinking about how to do this in

0:03:46.160 --> 0:03:49.800
<v Speaker 4>the private sector. So it's a combination.

0:03:49.400 --> 0:03:50.120
<v Speaker 1>Of those things.

0:03:50.360 --> 0:03:52.920
<v Speaker 2>All right, Well, appreciate you know the update there. I

0:03:52.960 --> 0:03:54.960
<v Speaker 2>hope to keep talking about that, but I do want

0:03:54.960 --> 0:03:57.200
<v Speaker 2>to move on and I want to talk about tokenization.

0:03:57.280 --> 0:04:00.640
<v Speaker 2>That obviously another big hot topic of the moment. And

0:04:00.680 --> 0:04:05.520
<v Speaker 2>when we're talking about everyday investors getting involved with tokenization,

0:04:06.000 --> 0:04:08.080
<v Speaker 2>what are some of the risks in your view that

0:04:08.320 --> 0:04:09.720
<v Speaker 2>could potentially come about.

0:04:11.640 --> 0:04:13.760
<v Speaker 4>Well, I think there has been a lot of interest

0:04:13.840 --> 0:04:18.640
<v Speaker 4>in tokenizing securities and other real world assets, and that's

0:04:18.640 --> 0:04:23.200
<v Speaker 4>something that really opened up after the SEC changed its

0:04:23.279 --> 0:04:25.640
<v Speaker 4>perspective on crypto. So we're seeing a lot of interest

0:04:25.720 --> 0:04:32.040
<v Speaker 4>from traditional financial firms and native crypto firms, and they're

0:04:32.040 --> 0:04:35.479
<v Speaker 4>different approaches that are being taken to tokenizing. So we

0:04:35.680 --> 0:04:39.040
<v Speaker 4>will work with people. We're willing to work with people

0:04:39.040 --> 0:04:42.520
<v Speaker 4>who are taking different approaches. But it's really important that

0:04:42.560 --> 0:04:47.279
<v Speaker 4>people be very careful about disclosing what the nature of

0:04:47.320 --> 0:04:51.359
<v Speaker 4>the asset is. When you tokenize something, it's still a security.

0:04:51.360 --> 0:04:53.960
<v Speaker 4>If you're tokenizing a security, it may be a security

0:04:54.000 --> 0:04:56.720
<v Speaker 4>with different characteristics, and that's something that needs to be

0:04:56.760 --> 0:05:01.880
<v Speaker 4>conveyed to investors. And you know, it's also important to

0:05:01.960 --> 0:05:05.839
<v Speaker 4>be aware of sometimes their trading restrictions or their restrictions

0:05:05.880 --> 0:05:10.120
<v Speaker 4>on who can access particular types of securities, and so

0:05:10.200 --> 0:05:11.880
<v Speaker 4>that's something people have to pay attention to.

0:05:12.680 --> 0:05:14.640
<v Speaker 2>And that's a point that you've made in the past,

0:05:14.680 --> 0:05:18.440
<v Speaker 2>that token is securities are still securities. You do have

0:05:18.600 --> 0:05:22.080
<v Speaker 2>some firms I'm thinking of Robinhood, for example, rolling out

0:05:22.279 --> 0:05:25.680
<v Speaker 2>token is stock trading. I believe that's taken hold in Europe.

0:05:25.760 --> 0:05:27.680
<v Speaker 2>So I mean, do you see that as a potential

0:05:27.720 --> 0:05:32.560
<v Speaker 2>area where you could run into some of these confrontations

0:05:32.560 --> 0:05:38.120
<v Speaker 2>over firms trying to really regulate and innovate and introduce

0:05:38.160 --> 0:05:40.919
<v Speaker 2>measures such as that, but potentially coming up against some

0:05:40.960 --> 0:05:42.679
<v Speaker 2>of these regulations that you're putting in place.

0:05:43.839 --> 0:05:47.680
<v Speaker 4>Well, without talking about any particular firms approach, I think

0:05:47.720 --> 0:05:50.360
<v Speaker 4>the bottom line is that we encourage firms to come

0:05:50.360 --> 0:05:52.280
<v Speaker 4>in and talk to us. We expect that there will

0:05:52.360 --> 0:05:56.599
<v Speaker 4>be some different approaches taken to tokenizing, and we're looking

0:05:56.640 --> 0:06:00.520
<v Speaker 4>forward to working with folks to try those different models

0:06:00.520 --> 0:06:04.080
<v Speaker 4>out and see what the market's like and see whether

0:06:04.160 --> 0:06:07.840
<v Speaker 4>or not tokenization of equity securities takes hold. I mean

0:06:07.839 --> 0:06:10.679
<v Speaker 4>that really will ultimately be up to the market. But

0:06:10.800 --> 0:06:14.239
<v Speaker 4>what our message is is that we're willing to work

0:06:14.279 --> 0:06:16.560
<v Speaker 4>through different potential models with people.

0:06:17.040 --> 0:06:18.599
<v Speaker 1>Well, you said something interesting there.

0:06:18.640 --> 0:06:21.919
<v Speaker 2>You know, if tokenized equities take hold and it's a

0:06:21.920 --> 0:06:24.400
<v Speaker 2>good reminder that this is very nascent, that we're only

0:06:24.480 --> 0:06:28.160
<v Speaker 2>just seeing the first few attempts at this come about.

0:06:28.240 --> 0:06:32.400
<v Speaker 2>But should these tokenized real world assets, should tokenize equities

0:06:32.720 --> 0:06:36.040
<v Speaker 2>really take off? Should we expect a formal pilot program

0:06:36.320 --> 0:06:38.640
<v Speaker 2>from the SEC for tokenized securities?

0:06:40.080 --> 0:06:42.919
<v Speaker 4>I think the pilot program again is more likely to

0:06:42.960 --> 0:06:46.760
<v Speaker 4>look like multiple pilots, with different people coming in and

0:06:46.800 --> 0:06:50.240
<v Speaker 4>trying to do this in different ways. And again we're

0:06:50.240 --> 0:06:53.360
<v Speaker 4>not trying to be the picker of winners and losers,

0:06:53.360 --> 0:06:59.039
<v Speaker 4>but letting the market decide. So really we expect that

0:06:59.080 --> 0:07:00.800
<v Speaker 4>there will be multiple options.

0:07:01.600 --> 0:07:04.200
<v Speaker 2>I do also want to talk about how you interact

0:07:04.240 --> 0:07:07.440
<v Speaker 2>with some of the other regulatory bodies in dc A.

0:07:07.760 --> 0:07:09.760
<v Speaker 2>For a lot of folks, it's kind of like alphabet.

0:07:09.840 --> 0:07:10.720
<v Speaker 1>So if you have the.

0:07:10.600 --> 0:07:14.000
<v Speaker 2>SEC, you also have the CFTC, And I'm wondering how

0:07:14.120 --> 0:07:17.400
<v Speaker 2>you work with the CFDC on crypto right now, if

0:07:17.400 --> 0:07:19.200
<v Speaker 2>at all, what does that relationship look like.

0:07:20.640 --> 0:07:23.960
<v Speaker 4>We have a good relationship with the CFTC. We've worked

0:07:23.960 --> 0:07:26.880
<v Speaker 4>with them. I personally have worked with the CFTC over

0:07:26.920 --> 0:07:30.360
<v Speaker 4>the years on a number of issues, including security based swaps,

0:07:31.480 --> 0:07:36.560
<v Speaker 4>and so right now we're both agencies are coming off

0:07:36.600 --> 0:07:40.760
<v Speaker 4>the Presidence Working Group report recommendations. We're both trying to

0:07:40.800 --> 0:07:44.560
<v Speaker 4>implement those recommendations, the ones that we can start already

0:07:45.000 --> 0:07:51.440
<v Speaker 4>absent market structure regulation legislation, and so we're coordinating with

0:07:51.560 --> 0:07:54.680
<v Speaker 4>the CFTC on moving forward on those recommendations.

0:07:55.200 --> 0:07:57.840
<v Speaker 2>Well. To that point, one of the recommendations was that

0:07:57.920 --> 0:08:01.360
<v Speaker 2>crypto exchanges and other crypto and entities that are registered

0:08:01.720 --> 0:08:04.360
<v Speaker 2>with the SEC that they should have to pay transaction

0:08:04.480 --> 0:08:07.960
<v Speaker 2>fees the same way that traditional brokerages do.

0:08:08.200 --> 0:08:10.160
<v Speaker 1>For example. Do you agree with that.

0:08:11.800 --> 0:08:16.880
<v Speaker 4>I certainly understand that we need to have the fees

0:08:17.040 --> 0:08:21.920
<v Speaker 4>fall on the people who are benefiting from the revenue

0:08:21.960 --> 0:08:26.000
<v Speaker 4>of the fees. So I think that as the markets change,

0:08:26.440 --> 0:08:30.200
<v Speaker 4>those changes should be reflected in fee revenue and Commissioner.

0:08:30.280 --> 0:08:33.400
<v Speaker 2>You also brought up market structure. We know that that

0:08:33.480 --> 0:08:37.319
<v Speaker 2>crypto market Structure bill is working its way through. This

0:08:37.480 --> 0:08:39.720
<v Speaker 2>sense seems to be on the street that it faces

0:08:40.080 --> 0:08:42.800
<v Speaker 2>a much tougher go ahead than the stable coin bill,

0:08:43.120 --> 0:08:43.760
<v Speaker 2>for example.

0:08:43.800 --> 0:08:45.320
<v Speaker 1>I would love to hear your thoughts there.

0:08:46.040 --> 0:08:49.200
<v Speaker 4>Well. I don't prognosticate about legislation any more than I

0:08:49.240 --> 0:08:51.440
<v Speaker 4>do about where the markets might go. In terms of

0:08:51.480 --> 0:08:56.440
<v Speaker 4>which models of tokenization they might embrace. But I do

0:08:56.520 --> 0:09:00.880
<v Speaker 4>think that the work has been really on the part

0:09:00.920 --> 0:09:03.200
<v Speaker 4>of the House and the Senate is now looking at

0:09:03.280 --> 0:09:03.920
<v Speaker 4>these issues.

0:09:05.160 --> 0:09:06.080
<v Speaker 1>It's a very.

0:09:05.840 --> 0:09:10.400
<v Speaker 4>Complicated piece of legislation to work out, but I think

0:09:10.520 --> 0:09:14.120
<v Speaker 4>important and we're happy to work with people in both

0:09:14.160 --> 0:09:17.120
<v Speaker 4>the House and the Senate on trying to get it

0:09:17.240 --> 0:09:21.000
<v Speaker 4>to the place where it will help to guide the

0:09:21.320 --> 0:09:22.960
<v Speaker 4>shaping of the industry.

0:09:23.160 --> 0:09:24.560
<v Speaker 1>And just game planning here.

0:09:24.679 --> 0:09:28.320
<v Speaker 2>Let's say that Congress doesn't isn't able to finish this

0:09:28.400 --> 0:09:30.480
<v Speaker 2>market structure bill by November.

0:09:31.000 --> 0:09:31.760
<v Speaker 1>What would that.

0:09:31.760 --> 0:09:34.880
<v Speaker 2>Mean for the SEC and your approach to regulation.

0:09:36.120 --> 0:09:38.360
<v Speaker 4>I think one thing that's important to underscore is that

0:09:38.679 --> 0:09:42.600
<v Speaker 4>we at the SEC are not waiting for legislation to work.

0:09:42.679 --> 0:09:44.280
<v Speaker 4>We have a lot of work that we can do

0:09:44.360 --> 0:09:46.640
<v Speaker 4>under the existing authority that we have, and we think

0:09:46.679 --> 0:09:50.800
<v Speaker 4>that the President's Working Group report urged us to take

0:09:50.840 --> 0:09:55.080
<v Speaker 4>those steps, and so we've been working since January on

0:09:55.160 --> 0:09:59.600
<v Speaker 4>providing guidance about where the securities laws apply and then

0:09:59.640 --> 0:10:04.720
<v Speaker 4>where they do apply, helping helping firms to navigate those rules.

0:10:04.800 --> 0:10:08.080
<v Speaker 4>And so that's something that we are hard at work on.

0:10:08.240 --> 0:10:12.160
<v Speaker 4>We're working on rulemaking and we think that what we

0:10:12.200 --> 0:10:16.760
<v Speaker 4>do will be consistent with whatever market structure legislation comes out.

0:10:17.160 --> 0:10:19.240
<v Speaker 2>And Commissioner, I do want to talk a little bit

0:10:19.280 --> 0:10:21.959
<v Speaker 2>about Project Crypto. I know that you know that's put

0:10:22.000 --> 0:10:26.440
<v Speaker 2>together to help implement the Presidential Working Group's recommendations. How

0:10:26.559 --> 0:10:29.440
<v Speaker 2>is that project going right now? What does that look like?

0:10:30.760 --> 0:10:33.199
<v Speaker 1>I mean, it's going it's going very well.

0:10:33.240 --> 0:10:38.000
<v Speaker 4>We're working very collaboratively with staff all across the Crypto

0:10:38.040 --> 0:10:41.160
<v Speaker 4>Task Force is working collaboratively with staff across the building

0:10:41.160 --> 0:10:45.679
<v Speaker 4>at the SEC. We are meeting with industry and with

0:10:45.720 --> 0:10:50.760
<v Speaker 4>other interested parties. We're taking written comments as well, and

0:10:51.200 --> 0:10:55.280
<v Speaker 4>we're putting that together into a package of reforms. As

0:10:55.320 --> 0:10:57.440
<v Speaker 4>I said, we've already gotten some guidance out the door,

0:10:57.480 --> 0:11:01.880
<v Speaker 4>but we are hoping to get some rulemaking, proposed rulemaking

0:11:01.880 --> 0:11:02.520
<v Speaker 4>out the door.

0:11:02.360 --> 0:11:03.360
<v Speaker 1>As well well.

0:11:03.400 --> 0:11:06.040
<v Speaker 2>Commissioner, we really appreciate you taking the time to speak

0:11:06.080 --> 0:11:09.280
<v Speaker 2>with us today. That is SEC Commissioner Hester Purce