SEC Commissioner Peirce Speaks Out on Crypto Regulation Concerns

SEC Commissioner Hester Peirce, a cryptocurrency advocate, voiced her concerns on Tuesday about the commission's regulatory approach toward crypto firms.

During a speech at the SEC Speaks event, she criticized how the SEC communicates and enforces regulations on digital asset companies.

Peirce singled out Staff Accounting Bill 121 (SAB 121), enacted in March 2022, for critique.

This bill, not officially a rule, requires crypto custodians to report liabilities and matching assets on their balance sheets.

Despite the lack of an official framework or clear guidance from the SEC, many in the industry treat SAB 121 as obligatory, impacting broker-dealers significantly.

The purpose behind SAB 121, as stated by SEC staff, is to address the risks associated with safeguarding crypto assets.

However, its implementation has sparked controversy, especially after the Government Accountability Office pointed out the SEC’s failure to comply with the Congressional Review Act in issuing SAB 121, a claim the SEC disputes.

The discontent with the bill has reached Congressional levels, with lawmakers proposing a resolution to overturn SAB 121.

Peirce also provided advice for industry participants feeling frustrated with the SEC's indirect guidance, often described as a “secret garden.”

This refers to the complex and sometimes contradictory directives shaping industry practices.

Peirce noticed a change in industry engagement with the SEC, with many now reluctant to consult with the commission.

To encourage positive interaction, she advised stakeholders to document their meetings with the SEC, prepare thoroughly, and collaborate with others in the industry.

Peirce’s message was clear: “Don't give up.” She encouraged firms to persevere and continue dialogues with the SEC, especially if they believe in the legal standing of their projects.

Her speech underscores the need for clear communication and persistent engagement in the face of regulatory challenges.