The US Securities and Exchange Commission (SEC) Commissioner Hester Peirce recently expressed her ongoing concerns regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). This comes after a speech by SEC Chief Accountant Paul Munter, where he reiterated the Commission’s unwavering stance on SAB 121. Despite the increasing attention on the regulation, Munter emphasized that the SEC staff’s perspective on SAB 121 has not changed. According to him, entities should record liabilities on their balance sheets to reflect their obligation to safeguard digital assets held for others. This approach is meant to provide investors with relevant information to evaluate the risks associated with safeguarding cryptocurrencies.
Exceptions and Controversy
Munter noted that there are certain exceptions to the rule. For instance, bank-holding companies that offer bankruptcy protection for safeguarded crypto assets may not be required to record liabilities. Additionally, broker-dealers that facilitate crypto transactions but do not have control over cryptographic keys might also be exempt. While the SEC argues that SAB 121 is designed to enhance transparency and risk management in the rapidly evolving crypto industry, it has faced criticism from various stakeholders who perceive it as regulatory overreach. Earlier this year, US lawmakers attempted to overturn the SEC’s guidance, but their efforts were vetoed by President Joe Biden.
Response and Critique
In response to Munter’s speech, Commissioner Peirce reiterated her concerns about both the substance and process of SAB 121 on social media. She invited feedback on the policy through email, indicating a willingness to engage with diverse perspectives. Nate Geraci, president of the ETF Store, weighed in on the debate by suggesting that the SEC appears reluctant to grant regulated financial institutions the ability to custody digital assets. He implied that the SEC is hindering the growth of the industry by limiting the participation of established financial entities in the crypto market.
The debate surrounding the SEC’s Staff Accounting Bulletin No. 121 continues to fuel discussions among regulators, industry players, and stakeholders. While the SEC maintains its position on the regulation’s importance for transparency and risk management, critics argue that it stifles innovation and restricts the involvement of traditional financial institutions in the crypto space. The clash of perspectives underscores the complexities of regulating emerging technologies in a rapidly changing financial landscape.
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