The US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has recently voiced her concerns regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). These concerns were brought up after a speech by SEC Chief Accountant Paul Munter on September 9, where Munter reaffirmed the Commission’s stance on SAB 121. Despite the growing attention around the regulation, Munter emphasized that the SEC staff’s perspective on SAB 121 has not changed. According to Munter, the staff believes that entities should record liabilities on their balance sheets to reflect their responsibility for safeguarding digital assets held on behalf of others.
Challenges and Exceptions to SAB 121
Munter explained that this approach aims to provide investors with timely and relevant information to assess the risks associated with safeguarding cryptocurrencies. However, there are some exceptions to this rule. For instance, bank-holding companies that safeguard crypto assets with bankruptcy protection may not be required to record liabilities. Similarly, broker-dealers that facilitate crypto transactions but do not have control over cryptographic keys may also be exempt from this requirement.
Munter’s views align with the SEC’s position, which asserts that SAB 121 is intended to enhance transparency and improve risk management in the rapidly evolving crypto industry. Despite these intentions, SAB 121 has sparked concerns within the industry, with many viewing it as an overreach by the SEC. Earlier this year, US lawmakers attempted to overturn the SEC’s guidance, but President Joe Biden vetoed the repeal.
In response to Munter’s speech, Commissioner Hester Peirce took to social media to reiterate her concerns about both the content and process of SAB 121. She encouraged others to share their thoughts on the policy with her via email. Nate Geraci, president of the ETF Store, also weighed in on the debate, stating that the SEC appears reluctant to allow regulated financial institutions to custody digital assets. According to Geraci, the SEC’s stance may be hindering these institutions from providing custody services for cryptocurrencies.
Overall, the ongoing debate surrounding SEC’s Staff Accounting Bulletin No. 121 highlights the challenges and complexities of regulating the crypto industry. As stakeholders continue to grapple with these issues, it is crucial to consider the various perspectives and concerns raised by key players within the industry. Ultimately, finding a balance between transparency, risk management, and innovation remains a key priority for regulators and market participants alike.