- SEC Commissioner Hester Pierce has once again decried the SEC’s anti-crypto Staff Accounting Bulletin (SAB) 121 over excluding experienced players from custodying crypto.
- Pierce further described the agency guideline’s position on investment as very strange and without an investor protection orientation
SEC Commissioner Hester Pierce has again expressed her reservations about the SEC’s anti-crypto guideline—SAB (Staff Accounting Bulletin) 121. Pierce described the guideline as saying that “we don’t want to have experienced players custodying crypto.”
According to the Commissioner, the SEC’s position of not wanting experienced players to custody crypto is a very strange and non-investor protection-oriented position.”
“I’m open to and happy to see developments that allow more people to come in and participate in the custody space. Again it should be done in an orderly way. I think the end goal of having parties engage in crypto that have experience in other parts of the world that they can bring into crypto. That’s generally a good thing.” said Pierce.
However, she considers it unfortunate that the government tries to “drive out players who would be interested in participating.” Pierce wants to see more participants custodying crypto—which it believes would be a potentially positive development.
The Commission introduced the SAB 121 guideline on March 31, 2022, with new requirements for financial institutions offering custodial services for crypto, which automatically streamlined this service to certain traditional financial institutions under their oversight. In essence, many institutions previously offering custody of digital assets are forced to give up the service.
Additionally, the guideline provided stricter reporting criteria for crypto custodians, such as determining the fair value of customers’ assets and recording a corresponding liability for themselves on the balance sheet per asset under custody. This stringent risk reporting is intended to reflect the risks and responsibilities associated with holding such assets on behalf of customers.
However, the guideline was not well received by the crypto industry. Surprisingly, other players that wouldn’t normally side with the industry such as Democrat lawmakers would attest to the impracticality of the rule by joining their Republican colleagues in the Congressional bid to overturn it.
Unfortunately, after excellently passing the House and Senate, President Biden vetoed the joint resolution. A subsequent attempt to overturn the veto also failed in the House stage.
Meanwhile, it seems even the agency understands how overwhelming the guideline’s requirements are to financial institutions. The agency has reportedly offered several large banks the go-ahead to bypass reporting a liability for crypto assets in their custody, provided they meet certain requirements that ensure customers’ assets would be secure in cases of bankruptcy or failure.
New legislation called “The Uniform Treatment of Custodial Assets Act” is already underway to counter SAB 121’s requirements which limit financial institutions from crypto custodial services, per Rep Wiley Nickel, a co-sponsor of the House Resolution to override the President’s veto. The lawmaker expects it to be a bipartisan bill that will allow banks to safely offer digital asset custody services.
