SEC Commissioner Hester Peirce has expressed ongoing concerns regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). She raised these concerns following a speech by SEC Chief Accountant Paul Munter on September 9, where Munter reiterated the Commission’s stance on SAB 121. Despite the increasing attention the regulation has garnered, Munter emphasized that the SEC’s staff’s viewpoint remains unchanged.
According to Munter, the SEC staff believes that entities should record a liability on their balance sheets to reflect their obligation to safeguard digital assets held on behalf of others. This approach, as per Munter, aims to provide investors with relevant and timely information to evaluate the risks associated with safeguarding cryptocurrencies for others. However, Munter also mentioned certain exceptions to this rule. For instance, bank-holding companies that offer safeguarding services with bankruptcy protection may be exempt from recording liabilities. Similarly, broker-dealers facilitating crypto transactions without control over cryptographic keys may also not be required to record liabilities.
Despite the SEC’s intentions to enhance transparency and risk management in the rapidly evolving crypto industry through SAB 121, the regulation has faced criticism from industry participants who perceive it as an overreach by the SEC. Earlier this year, US lawmakers passed a bill to overturn the SEC’s guidance, but President Joe Biden intervened and vetoed the repeal. In response to Munter’s remarks, Commissioner Peirce expressed her reservations about both the content and the process of SAB 121 on social media platform X. She invited others to share their feedback on the policy via email.
Nate Geraci, president of the ETF Store, noted that the SEC appears reluctant to grant regulated financial institutions the authority to custody digital assets. He remarked that the SEC seems unwilling to empower regulated entities to offer crypto custody services, stating, “[The SEC] simply don’t want to provide regulated financial institutions [with the] ability to custody crypto.”
The controversy surrounding SEC’s Staff Accounting Bulletin No. 121 continues to persist, with conflicting views from regulators, industry participants, and experts. The debate over the regulation’s impact on transparency and risk management in the crypto industry underscores the challenges of balancing investor protection and innovation in a rapidly changing financial landscape.
