Some of that, coming out yesterday during the house, testimony featuring fed chair jerome powell after he clarified a statement about the idea of banning crypto, saying he has no intention of doing so. Take a listen so, mr chairman, as a matter of policy, is it your intention to ban or limit the use of cryptocurrencies like were seeing in china? No and, and i i immediately realized i had misspoken there. I didnt mean to take the word cryptocurrency out of that sentence and i would say fairly widely understood that central bank digital currencies could perform some of the some of the uh could make, but no intention to bans less uh, no intentions, no intention to ban that. But theyre you know, the stable coins are are like money, market funds, theyre like bank deposits but theyre to some extent outside the regulatory perimeter and its its appropriate that they be regulated same activity, same regulation and elsewhere. This week we also had the chair of the sec reiterating his support for eventually approving a bitcoin etf tied to futures contracts over those looking to set up an etf that would invest in spot bitcoin. The agency also, though, delaying once again weighing in on four different bitcoin etf applications out of the stack of more than a dozen still awaiting a decision, and for more on the thinking there at the sec very happy to welcome into the show today sec. Commissioner hester purse joining us here and commissioner appreciate you coming on to chat here.

I suppose we can start with a distinction there around shatter of banning bitcoin and chatter around bitcoin etfs, because going the futures would be very different than spot. I know youve been pretty outspoken about the delay in wanting to see the sec get some of this stuff approved. So how close might we be to one of those approvals now hi zach and its great to be with you um its its hard to tell when an approval will happen. Each approval is obviously dependent upon the facts and circumstances of the application, but youre right. The chair gensler has now spoken out and said that hes open to the idea of a futures based bitcoin etf um. You know, i think my concern is that weve been waiting a long time to get a bitcoin or um. You know perhaps even eath based exchange traded product out there, there have been lots of applications and a futures based product is very different than a spot based product um. So i think you know it maybe has a different uh. It has a different value proposition but well see what happens yeah the futures one, i think, weve seen a you know in canada, the futures uh tied mutual fund there only attracting about 15 million dollars. I think in assets under management in two months, whereas for 45 days we saw a billion dollars attracted to the spot etf, but i mean when it comes to the consumer out there.

A lot of this is about investor protections right, so i mean, if youre adding costs. What should people maybe understand about futures over spot trading? Well, i think that one one thing that that certainly chair gensler is thinking about is the futures market is a regulated market. Um much like um, the markets were familiar with, whereas the spot markets and crypto are are not regulated. The way were familiar with, as, as stock market regulators ive made the point that thats not necessary. Gold markets are also not regulated the way our stock markets are yet we have a gold based exchange traded product. I dont see why we couldnt similarly have a bitcoin based exchange traded product yeah. Elsewhere, too, i mean when we think about regulation thats, one thats pressing, because a lot of people – you me everybody else watching this space has been waiting for elsewhere. Youve got the other push to kind of crack down on what is a security? We saw that in terms of coinbase lend and then canceling those plans there uh. It was interesting because some people might say it was. You know a necessary step to signal where the priorities are at the sec in terms of reeling in the industry. Other people might look at it and say it could have been a land grab in the sec establishing its place to regulate a quickly growing market. When you got the fed the cftc, the irs fincen everybody kind of looking at it as whos going to be the regulator i mean, would that be a fair take that it was kind of maybe the sec doing a little bit of elbowing? Well, i dont want to speak to any particular product or company, but i will say that there is jockeying for position among financial regulators now at the state and federal, i think primarily were seeing it now at the federal level of people trying to assert jurisdiction and Thats, why i think its important for for the american people to have a role in this conversation about not only who should be regulating crypto, but how it should be regulated, and where should it be different from the way other things are regulated and where should it Be the same it really isnt appropriate to have this just sorted out by um, which regulator is, is the quickest to to grab hold of something? Commissioner lets talk about something else the sec has been considering, and that is regulation around payment for order flow um.

Of course, that came into you know real focus at the start of the year, at the height of the game, stop trading and robin hoods involvement. There. You said in the past that you think better disclosures, not necessarily a ban on payment for order flow is the way to go to address potential conflicts where those conversations stand and what specific disclosures are you looking at well, kiko thats, a great question. Its certainly been a topic thats on the chairs agenda and he has said that were going to be taking a look at equity market structure across the board and included in that will be payment for order flow questions. What what you know well see what kinds of proposals he puts before us to consider, but what i would say is i generally take the view that, if theres a voluntary agreement between two people – or in this case between you know, you might see a broker and A customer and it works well for both of them. Then we shouldnt stand in the way of that as long as both sides and the customer understands exactly what the deal is and thats why transparency is so important. I mean transparency seems certainly key, but theres a lot of others whove said: look its its this zero commission trade, just the ease with which people can trade. Now, in a number of these platforms that has led to the sort of concerns that have now risen, youve taken the opposite view, saying you know we shouldnt necessarily just blame tech for these issues.

How do you you know think about regulation in this environment? That has really it feels like it has shifted fundamentally beyond how trades were used to be executed and just the market as it is today. Right, i mean people used to have to pay a tremendous amount to execute a trade, and now people are able to get in and out of stocks without paying paying a lot. The retail investor has never had cheaper access to the equity markets, and so i think, underlying the questions that people have around this you know are people trading too much, because its too cheap for them is a real questioning of the of the ability of regular americans To make decisions for their own financial futures – and i just push back against that – i think that people are fully capable of making decisions, understanding their own circumstances, their own risk tolerance and its, not my job as a regulator to stand in the way of those decisions. It is my job to make sure that theyre getting the information they need to make the decisions, but i dont want to make the decisions for them. I guess kind of applying that same thinking. Back to the crypto sphere. I mean what would be top of mind for you in terms of what youd want to see in regulations beyond you know kind of what weve heard skittishness around this week when it came to an outright ban. I know bitcoin and ether looked at, maybe not as securities, but looking down the line.

How do you address that? Well, i think there are a few areas where we really need to get to work on the regulatory front. We need to provide clarity around when well be considering something to be a security, and then we need to be providing clarity about if something is deemed to be a security. How do regulated entities interact with it in a way thats, legal and um? You know how: how can how can individuals trade in digital assets um? What do the intermediaries have to do that serve those clients, so we have a lot of work to do on the regulatory front. Unfortunately, the approach weve taken so far is just to wield a big enforcement hammer yeah and were seeing that right now and it seems like lending seems to be top of mind in the first thing that the hammer is going to fall on. But when it comes to maybe d5 thats an interesting thing, because you hear from a lot of d5 degens out there saying look, the sec has got enough on its plate right now, theyre not going to come for us or any of these protocols out there. That are kind of automated, which also look pretty tough to clamp down on from a regulatory standpoint if theres, not a centralized company, so they might say, look were in the clear. What are your thoughts on that, and maybe i guess if it becomes so difficult when those protocols are quickly changing and quickly, advancing every day, if theres, a fear that the sec or other regulators might just never be able to catch up there? Well, i think there is certainly difficulty on the part of a regulator to stay on top of developments in defy and crypto more generally, but there people shouldnt assume that the sec can only focus on one thing: the sec has a lot of resources and can go After a lot of things simultaneously, so beware of that and you need to be thinking about whether the securities laws apply to what youre doing um and you know consulting with lawyers when necessary.

But i i think another point is that look. The decentralized world is one that is very new to us, because we are used to dealing with large, usually large, centralized intermediaries, so true decentralized projects do pose a challenge. I think what i would caution people to be aware of is that sometimes something claims to be decentralized and isnt, and there is actually a centralized entity, and i think certainly regulators will be looking to that centralized entity. So again, i think this is something our our society needs to have a conversation about, because decentralized finance carries within itself, inherently some ability to to self regulate, and i think we need to take that into account as we design a regulatory system yeah. One final question for me: here too, as you talked about, we mentioned uh regulatory hammers here falling down on people uh and inviting people to come and discuss these things with the sec. But some people might point out. Maybe the the kind of uh two things going on there if you do have a company like coinbase that did come and talk to the sec only to be kind of met with force on one of the products. I mean how do you kind of bridge that and say look come talk to us and what would you say to people who maybe saw that, as maybe a disincentive to discuss these things with the sec? Well again, i cant talk to the particulars of any um situation and what i can say is that i have told people to come into the sec and i, of course urge people to come talk to me, but it is.

It is disconcerting to me that for three years now, ive been asking for regulatory clarity and we cant seem to provide any, and so i think this is really becoming a huge barrier to this industry being able to develop in a in a way thats safe, but Also, in a way that allows innovation to happen and its a real shame to me that we are not um, not just taking up the mantle as regulators to develop a regulatory framework. My line, i had one more around some news: that wall street journals reporting here about uh the buy administration may be pushing to regulate stable coin issuers as banks. Of course, stable coins were attached to that uh lending feature uh. What would you say to maybe that happening, uh and whether it would kind of crimp what the sec is looking to do in terms of their own regulatory? Push well well, see what happens with stable coins theres. Certainly a lot of discussion of it. Um – and i know, as i said, theres a lot of jockeying for position among regulators now. I just hope that, in all of this people, dont real dont lose sight of the fact that stable coins are, you know, are an innovation that a lot of people are using and we need to figure out a regulatory regime that will allow them to continue to Use them all right sec, commissioner. Esther purse appreciate you coming on here to chat with us today hope to have you back on soon.