Good morning. Katie (Kolchin), thank you for that kind introduction, and congratulations on your first SIFMA conference in this role. You may know that I was a card-carrying member of one of your committees for nearly a decade. We worked at the steady direction of Ann Vlcek, and then T.R. Lazo, professionals of both wisdom and boundless patience. Many of the issues you’ll tackle remain unresolved from those times. I wish you well and look forward to engaging with you and your members. And as the meme goes, may you find committee members who are as dedicated to SIFMA’s policy work as Brett Redfearn is to market data reform.
Before I proceed, please accept the usual disclaimer: my remarks today are made in my official capacity as the Commission’s Director of the Division of Trading and Markets and do not necessarily reflect the views of the Commission, the Commissioners, or members of the Division’s staff.
Digital assets rely on distributed networks, cryptographic proofs, consensus mechanisms, and self-executing code. Because no single entity or central intermediary is necessarily involved, these assets are often called “trustless.” And yet, trust is a foundational value of our society—and of our industry, in particular. A key focus of the Commission under Chairman Atkins’ leadership is to rebuild trust across the marketplace. At the same time, the Chairman endeavors to extend that marketplace to integrate “trustless” digital assets, which present promising innovations and efficiencies. The tension inherent in these tasks is worth your reflection.
Ganson Purcell was our Division’s second Director. In the wake of the Great Depression, the Commission worked to rebuild trust in a broken marketplace. Often, its work was met with skepticism from various participants, many jealous of another’s perceived position.
In a speech at the Boston Stock Exchange on March 3, 1938, Director Purcell observed:
“The Securities and Exchange Commission, as you know, has powers which may be of wide economic significance to the various securities markets under its jurisdiction. We are not unaware that there is concern in those markets as to the manner in which the Commission may exercise its powers. That is inevitable. Yet, I have seen worry of that type carried to extreme absurdities. Some of the rumors and reports which gain circulation could be dismissed if they were given but a moment’s serious analysis. For example, the over-the-counter dealers complain that it is our sinister purpose to force trading in their securities on to the smaller exchanges. The smaller exchanges, in turn, complain that we intend to drive trading to the big New York exchanges. And finally, the New York exchanges will tell you that it is our secret desire to drive trading into the over-the-counter markets, which is where we started. I have also heard the same rumors in reverse order and I imagine you have too.”[1]
Director Purcell knew how to build trust during trying times. Nearly four years later, he became the Commission’s sixth Chairman and served for four and a half years – the fourth longest tenure in the agency’s history.
In recent years, marketplace trust was again challenged. Unlike the Great Depression, this loss of trust was not caused by a marketplace failure. This time, through poor policy choices, regulation by enforcement, and a lack of good faith engagement, the marketplace trust in the public sector was challenged. This loss was most acute with investors active in digital assets. The Chairman intends to repair this damage.
On July 31, Chairman Atkins announced “Project Crypto,” building on the leadership of Commissioner Peirce and the Crypto Task Force, to “help ensure that the United States remains the best place in the world to start a business, develop cutting-edge technologies, and participate in capital markets.”[2] Competition, amongst and between incumbents and innovators, is central to this initiative.
Last week, Chairman Atkins made clear that the market will set the path forward:
“A reasonable Commission approach to crypto will not by itself decide the fate of the market—or of any particular project. Markets will do that. But it will help to ensure that the United States remains a place where people can experiment and learn, fail and succeed, under rules that are both firm and fair.”[3]
Since the summer, the Division has engaged a wide variety of market participants regarding digital assets, across a number of functions such as primary issuance, secondary trading, and custody. Our goal is to advise the Commission on how to facilitate “innovation without arbitrage.” As policy is modernized to accommodate digital assets, I believe neither new entrants nor legacy providers should be advantaged. We should not impose ourselves between commercial competitors. And we should trust market forces as the ultimate arbiter of value.
Notwithstanding our posture, the Division has encountered occasional skepticism, and understandable confusion, similar to what Director Purcell described nearly 90 years ago. Today, in place of New York floor brokers, regional market makers, and over-the-counter dealers, we have global exchanges, DeFi platforms, app-based brokers, and non-custodial wallets. The competitive landscape is rapidly changing and global. The commercial stakes could not be higher.
I also appreciate that we start from a deficit of trust. Director Purcell had to rebuild trust in a private sector that had squandered it during the Great Depression. Now, it is the public sector that must rebuild trust with industry and the public. I firmly believe that even trustless assets will trade best in a marketplace based on a foundation of trust. Wisely, Director Purcell did not put a regulatory thumb on the scales of marketplace competition. I aim to follow his prudent example.
Renew your faith in the Division. Refresh your confidence in the importance of private sector competition and innovation. Rekindle your patriotism, anchored on our nation’s supremacy in global markets. The investing public you serve stands to benefit from the progress you can achieve.
Thank you for your time and attention. I look forward to your questions today and continued engagement in the future.
