US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has recently expressed persistent concerns regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). This comes after SEC Chief Accountant Paul Munter reaffirmed the Commission’s unwavering stance on SAB 121 during a speech on September 9th. Munter emphasized that the SEC staff’s perspective on the contentious SAB 121 has not changed, despite the increasing attention it has garnered.
Munter clarified that according to the SEC staff, an entity must recognize a liability on its balance sheet to account for its obligation to safeguard digital assets held on behalf of others. This approach, as per Munter, is essential for providing investors with pertinent and timely information to evaluate the risks associated with safeguarding cryptocurrencies on behalf of others. While there are certain exceptions to this rule, such as bank-holding companies with bankruptcy protection and broker-dealers with no control over cryptographic keys, Munter’s views align with the SEC’s objective of enhancing transparency and risk management in the rapidly evolving crypto industry.
Despite the SEC’s intentions behind SAB 121, the regulation has been met with apprehension within the industry, with many perceiving it as an excessive intervention by the SEC. Earlier this year, US lawmakers attempted to overturn the SEC’s guidance on SAB 121, but President Joe Biden intervened and vetoed the repeal. In response to Munter’s speech, Commissioner Peirce took to the social media platform X to reiterate her reservations about both the content and process of SAB 121. She encouraged stakeholders to provide feedback on the policy via email.
Nate Geraci, president of the ETF Store, criticized the SEC’s reluctance to permit regulated financial institutions to hold digital assets in custody. He voiced his belief that the SEC is hesitant to grant regulated financial institutions the authority to custody cryptocurrencies, stating, “[The SEC] simply don’t want to provide regulated financial institutions [with the] ability to custody crypto.”
The ongoing debate surrounding SEC’s Staff Accounting Bulletin No. 121 highlights the differing opinions within the industry regarding the regulation’s efficacy and necessity. While the SEC aims to improve transparency and risk management in the crypto sector through SAB 121, concerns and criticisms from various stakeholders continue to challenge its implementation and acceptance.
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