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Highlights
- Peirce criticizes SEC's crypto guide, SAB 121, as a regulatory maze.
- House Committee moves to rescind SEC's controversial SAB 121.
- SEC's Peirce highlights decline in public engagement on crypto rules
During the “SEC Speaks” event, an initiative sponsored by the Practicing Law Institute, SEC Commissioner Hester Peirce voiced her criticisms concerning the regulatory approach of her agency towards the crypto industry, particularly focusing on Staff Accounting Bulletin 121 (SAB 121).
Peirce, known for her independent views within the Commission, highlighted the complexities introduced by crypto regulation such as SAB 121 and related oral guidance, which she argues complicates the regulatory landscape for firms involved in the custody of digital assets.
Controversy Surrounding SAB 121
SAB 121 was released in March 2022 and requires companies that hold cryptocurrencies on behalf of customers to record these assets as liabilities on their balance sheets.
This instruction has stirred controversy between the crypto community and legislators as to whether such a directive would discourage banks from offering custodial services for digital assets.
The wide-ranging implications of the bulletin have led to legislative attempts at its rescission, with the argument that such an important regulatory measures must be passed by the Commission itself, not through the staff-level guidance.
SEC’s Public Engagement Criticized
Commissioner Peirce argued that the SEC’s link to the public has become loose and pointed out that the meaningful interaction between the Commission and the stakeholders has been reduced.
Peirce points out that some public inquiries and concerns on crypto regulation are ignored due to a change in agency behavior to one that does not encourage proactive communication and transparency.
Legislative Response to Crypto Regulation Concerns
In response to the controversy surrounding SAB 121, the House Financial Services Committee has taken steps to challenge the bulletin’s standing. The committee recently voted to advance a resolution that, if passed by both the House and Senate, would nullify SAB 121.
Those in favor of the motion claim that the bulletin’s demands go against conventional banking practices and may have unintended side effects on the rapidly growing crypto market, among which could be the effects on the spot Bitcoin exchange-traded funds (ETFs) that were recently approved.
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