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Hester Peirce: SEC is closing the door on cryptocurrencies

Hester Peirce - SEC is closing the door on cryptocurrencies Hester Peirce - SEC Commissioner

Exploring the SEC's Stance on Cryptocurrencies Through Hester Peirce's Insight

Hester Peirce, affectionately dubbed "Crypto Mom" for her supportive view on digital currencies, recently voiced her concerns over the Securities and Exchange Commission's (SEC) latest regulatory stances. During her speech at the annual SEC Speaks conference, Peirce highlighted a growing issue within the SEC's regulatory framework, specifically targeting the contentious Accounting Bulletin 121 (SAB 121) unveiled in March 2022.

The Crux of SAB 121

SAB 121, as outlined by the SEC, introduces stringent accounting guidelines for entities keen on harboring cryptocurrency assets. A notable aspect of these guidelines is their restrictive impact on banks' ability to hold digital assets for their clients. According to Peirce, the introduction of SAB 121—devised sans the banking sector's input—fails to fortify investor protection. Instead, it places a significant damper on the willingness of banks and brokerage firms to engage with cryptocurrencies, attributing to potential adverse effects on their financial health.

Consequences for Crypto Custodianship

Peirce further elucidated the ramifications of SAB 121 in the context of custodian bankruptcy scenarios. Under such circumstances, there looms a possibility that the custodied digital assets might be deemed property of the custodian, rather than the rightful owners. This, in turn, poses a stark risk to the secure storage of cryptocurrencies, prompting financial institutions to distance themselves from the crypto sector.

Legislative Pushback

The House Financial Services Committee (HSFC) took a notable step on March 1, casting a vote on a resolution aimed at nullifying SAB 121. Republican Congressman Tom Emmer lambasted the bulletin as tangible evidence of SEC Chairman Gary Gensler's apparent aversion to cryptocurrencies.

The SEC's Isolation from Crypto Engagement

Peirce lamented the SEC's growing isolation from meaningful discourse with the public, especially on matters of emerging technologies and digital currencies. She pointed out that the looming threat of regulatory enforcement has led investors and cryptocurrency firms to steer clear of engagements with the SEC, fearing adverse legal repercussions.

A Glimmer of Hope

Despite the prevailing challenges, Peirce commenced the year on an optimistic note, suggesting that cryptocurrency companies aiming to launch ether-based exchange-traded funds might not necessarily have to engage in legal battles with the SEC. She also reiterated her support for the decentralization of the U.S. financial system, underscoring her belief in the transformative potential of blockchain technology.

In summarizing Peirce's stance, it's clear that the SEC's current approach to cryptocurrency regulation remains a contentious issue, with significant implications for the future of digital asset custody and innovation within the financial sector. 

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