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SEC's closed-door policy stifles crypto innovation – Hester Peirce

by SuperiorInvest

US Securities and Exchange Commission Commissioner Hester Peirce has dealt another blow to her agency, criticizing the regulator's guidance on cryptocurrency custody and calling for greater interaction with the public.

Speaking at the annual SEC Speaks conference on April 2, Peirce, also known to cryptocurrency enthusiasts as 'Crypto Mom', said a “particularly pernicious weed” had emerged in the company's “secret garden” of policy guidelines. SEC. in response to the controversial Personnel Accounting Bulletin 121 (SAB 121).

In March 2022, the SEC issued SAB 121, which outlines the regulator's accounting guidelines for institutions seeking to custody crypto assets. In particular, SAB 121 prevents many banks from holding crypto assets on behalf of clients.

Peirce noted that SAB 121, issued without the involvement of the banking sector, does not protect investors but rather keeps experienced banks and brokers away from the cryptocurrency custody business due to its capital implications.

“It is driving broker-dealers to allocate significant capital to their cryptocurrency custody businesses or avoid the business altogether. Arguably, SAB 121 does not protect investors.”

Additionally, if the custodian fails, these assets could be treated as if they belonged to the failed entity, not that entity's clients, he added.

On March 1, the House Financial Services Committee (HSFC) voted in favor of a resolution seeking to repeal the bulletin. Republican Congressman Tom Emmer described SAB 121 as an “unlawful” example of SEC Chairman Gary Gensler's “relentless bias toward the digital asset ecosystem.”

Hester Pierce speaking at SEC Speaks 2024. Source: SECOND

Additionally, Peirce said the SEC had closed itself off from productive engagement with the public, especially when it came to emerging technologies like cryptocurrencies.

“The culture at the top of the SEC has changed, which in turn has changed the way the agency interacts with the public,” he said.

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Pierce added that both investors and companies are hesitant to meet with the SEC for fear of enforcement actions, especially in areas such as cryptocurrencies, which the regulator has identified as priorities for increased enforcement.

“People have told me that they desperately want to have substantive conversations with staff, but are worried that the inevitable result of such a meeting will be a call from authority.”

The Commissioner called on the SEC to restore open communication with the public, provide clear guidance, and facilitate, rather than impede, responsible innovation, including in areas such as cryptocurrency custody.

On April 3 mail For

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