At the recent "SEC Speaks" event hosted by the Practicing Law Institute, U.S. SEC Commissioner Hester Peirce voiced strong criticism of the regulatory approach towards the cryptocurrency industry, particularly highlighting Staff Accounting Bulletin 121 (SAB 121).

Known for her dissenting views within the Commission, Peirce highlighted the challenges posed by regulations such as SAB 121 and accompanying informal guidelines, pointing out the added complexities faced by businesses involved in digital asset storage.

Impact on Businesses

Under the guidelines of SAB 121, companies holding cryptocurrencies for clients are mandated to classify these assets as liabilities on their financial statements by March 2022. This directive has sparked debates between lawmakers and the crypto community regarding its potential to discourage banks from offering custody services for digital assets.

The broad implications of the bulletin have spurred legislative actions aimed at overturning it, arguing that significant regulatory changes should be decided by the Commission itself rather than through staff-level recommendations.

Diminished Engagement

Commissioner Peirce expressed concerns about the diminishing meaningful interactions between the SEC and stakeholders, noting a weakened connection between the agency and the public. The shift away from proactive communication and transparency has led to the neglect of public inquiries and worries regarding crypto regulations.

In response to the controversy surrounding SAB 121, the House Financial Services Committee has initiated inquiries into its validity. Members of the committee are currently pursuing a resolution that would revoke SAB 121 if it garners support in both the House and Senate.