The US Securities and Exchange Commission’s (SEC) Commissioner Hester Peirce has recently voiced her ongoing concerns regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). This comes in response to a speech given by SEC Chief Accountant Paul Munter on Sept. 9, where he reiterated the Commission’s unwavering stance on SAB 121.
Munter emphasized that the SEC staff’s perspective on SAB 121 has not changed despite the increasing scrutiny it has faced. According to Munter, the staff believes that entities should recognize a liability on their balance sheets to account for their obligation to protect digital assets held for others. This, he argued, is essential for providing investors with pertinent information to evaluate the risks associated with safeguarding cryptocurrency on behalf of others.
While Munter defended the SEC’s position on SAB 121, he acknowledged that certain exceptions exist. For instance, bank-holding companies that safeguard crypto under bankruptcy protection may be exempt from recording liabilities. Similarly, broker-dealers facilitating crypto transactions but lacking control over cryptographic keys may also qualify for an exemption.
Despite the SEC’s intentions to promote transparency and bolster risk management in the rapidly evolving crypto sector, SAB 121 has stirred apprehensions within the industry. Many industry participants perceive the regulation as an unjustified intrusion by the SEC. Earlier this year, US lawmakers moved to overturn the SEC’s guidance; however, President Joe Biden intervened by vetoing the repeal.
In light of Munter’s speech, Commissioner Peirce took to social media to reiterate her apprehensions regarding both the substance and the process of SAB 121. She encouraged stakeholders to share their feedback on the policy with her via email. Nate Geraci, president of the ETF Store, criticized the SEC for appearing reluctant to grant regulated financial institutions the authority to custody digital assets, suggesting that the SEC is hindering their ability to do so.
This controversy surrounding the SEC’s Staff Accounting Bulletin No. 121 underscores the complex dynamics at play within the regulatory landscape of the crypto industry. As stakeholders continue to grapple with the implications of SAB 121, ongoing dialogue and engagement between regulators, industry participants, and policymakers will be crucial in shaping the future of crypto regulation.