At the annual SEC Speakers Conference on April 2, U.S. Securities and Exchange Commission Commissioner Hester Peirce, often dubbed "Crypto Mom" by cryptocurrency enthusiasts, voiced criticism towards her agency's handling of cryptocurrency custody guidance and urged for increased public engagement.
Peirce raised concerns about the repercussions of the SEC's Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, which sets accounting standards for institutions involved in cryptocurrency custody. She argued that the guidelines, issued without input from the banking industry, have resulted in unintended consequences by discouraging experienced banks and broker-dealers from entering the cryptocurrency custody business due to capital implications.
According to Peirce, SAB 121 not only fails to protect investors but also leads to adverse outcomes such as forcing broker-dealers to allocate significant capital to cryptocurrency custody or avoid the business altogether. Moreover, she highlighted the risk that if a custodian goes bankrupt, clients' assets may be deemed as belonging to the bankrupt entity rather than the clients themselves.
Peirce's remarks come amid growing discontent with SAB 121, with the House Financial Services Committee voting in favor of a resolution to overturn the proclamation. Republican Congressman Tom Emmer criticized the SEC Chairman Gary Gensler's handling of the issue, describing SAB 121 as an "illegitimate" example of bias against the digital asset ecosystem.
Peirce also lamented a shift in the SEC's culture, noting a decrease in productive engagement with the public, particularly concerning emerging technologies like cryptocurrencies. Investors and companies, she said, are hesitant to interact with the SEC due to fears of potential enforcement actions, particularly in priority areas like cryptocurrency.
To address these concerns, Peirce called for the SEC to reestablish open communication with the public, provide clearer guidance, and support responsible innovation, including in cryptocurrency custody. Her suggestions were echoed by Coinbase Chief Legal Officer Paul Grewal, who expressed support for forming an advisory committee to better understand the practical implications of regulatory rules.
