Hester Peirce Slams U.S. Crypto Rules: “It’s Like Playing Floor Is Lava in the Dark”
SEC Commissioner calls for clear and rational crypto regulations to end confusion in the financial industry.
SEC’s Hester Peirce: Crypto Regulation Is a Dangerous Game
At a high-level SEC “Know Your Custodian” roundtable event on April 25, Commissioner Hester Peirce didn’t mince words about the chaotic state of U.S. crypto regulation.
“It is time that we find a way to end this game. We need to turn on the lights and build some walkways over the lava pit,” Peirce declared, criticizing the lack of clear pathways for financial institutions wanting to engage with digital assets.
Crypto Rules Compared to a Dark, Treacherous Game
Peirce compared the current regulatory environment to the children’s game “The Floor is Lava,” but with a twist:
“The twist in the regulatory version is that it is largely played in the dark: burning legal lava and no lamps to illuminate the way.”
In this analogy, crypto itself is the lava. Firms must leap from one unclear regulation to another without ever touching crypto directly — or risk severe consequences.
“To engage in crypto-related activities, SEC-registrants have had to hop from one poorly illuminated regulatory space to the next,” Peirce said, illustrating the high-stakes balancing act companies must perform.
Key Challenges Facing Crypto Firms
According to Peirce, major pain points include:
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Uncertainty over which crypto assets are considered securities.
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Confusion about who qualifies as a “qualified custodian.”
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Fears that exercising staking or voting rights could accidentally trigger custody violations.
Without clear guidelines, brokers and trading systems (ATS) are hamstrung, making it nearly impossible to build a robust crypto market in the U.S..
Calls for Immediate Reform Inside the SEC
Commissioner Mark Uyeda echoed Peirce’s concerns, stressing the urgent need for realistic custodial solutions. He suggested that advisers should be permitted to use “state-chartered limited-purpose trust companies” authorized to hold crypto assets.
Meanwhile, Paul Atkins, newly sworn-in SEC Chair, expressed optimism about blockchain’s future benefits — from increased transparency to reduced costs. However, he stressed the importance of creating clear regulatory frameworks, hinting that the previous leadership under Gary Gensler had fostered confusion rather than clarity.
“I look forward to working with Congress and the administration to create a rational, fit-for-purpose framework for crypto assets,” Atkins said.
Final Thoughts
The message from within the SEC is growing louder: U.S. crypto regulation must evolve — or risk stifling innovation entirely. As Peirce warns, without lighting the way, the industry will keep playing a dangerous game in the dark.
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