United States Securities and Exchange Commission (SEC) Commissioner Hester Peirce has once again criticized her own agency, expressing her dissatisfaction with the regulator’s guidance on crypto custody and calling for increased interaction with the public.
During her speech at the annual SEC Speaks Conference on April 2, Peirce, who is affectionately known as “Crypto Mom” among crypto enthusiasts, referred to a problematic issue within the SEC’s policy guidelines as a “particularly pernicious weed” in its “secret garden”. She was specifically addressing the controversial Staff Accounting Bulletin 121 (SAB 121).
SAB 121, which was issued by the SEC in March 2022, provides accounting guidelines for institutions that want to offer custody services for crypto assets. Importantly, SAB 121 imposes restrictions that prevent many banks from providing crypto custody services to their clients.
Peirce pointed out that SAB 121, which was developed without input from the banking sector, fails to protect investors and instead excludes experienced banks and broker-dealers from the crypto custody business due to its capital implications. She also highlighted that if a custodian were to fail, these assets could be considered as belonging to the failed entity rather than the customers.
On March 1, the House Financial Services Committee voted in favor of a resolution that aimed to overturn SAB 121. Republican Congressman Tom Emmer described the bulletin as “illegal” and as evidence of SEC Chair Gary Gensler’s bias against the digital asset ecosystem.
Peirce also criticized the SEC for its lack of engagement with the public, particularly when it comes to emerging technologies like crypto. She noted that the agency’s culture has changed at the top, affecting its interaction with the public.
Peirce added that both investors and companies are reluctant to engage with the SEC due to the fear of enforcement actions, especially in areas such as crypto that the regulator has identified as enforcement priorities. She called for the SEC to restore open communication with the public, provide clear guidance, and support responsible innovation, including in the field of crypto custody.
Coinbase’s chief legal officer, Paul Grewal, expressed his support for Peirce’s comments in a post on April 3, suggesting the creation of an advisory committee to gain a better understanding of how rules actually function.
The question remains: Does SEC Chair Gary Gensler have the final say?