SEC's SAB 121 Under Scrutiny

US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has raised ongoing concerns about the SEC's Staff Accounting Bulletin No. 121 (SAB 121).

Her comments came after a Sept. 9 speech by SEC Chief Accountant Paul Munter, who affirmed that the Commission's stance on SAB 121 remains unchanged.

Munter emphasized that the SEC staff's view on the controversial SAB 121 has not shifted, despite the growing attention around the regulation.

Munter explained that the staff believes an entity must record a liability on its balance sheet to reflect its responsibility to safeguard digital assets held for others.

He stated this approach provides investors with timely and relevant information to assess the risks of safeguarding crypto on behalf of others. Munter noted that some exceptions apply.

For example, bank-holding companies that safeguard crypto with bankruptcy protection may not need to record liabilities. Additionally, broker-dealers facilitating crypto transactions but lacking control over cryptographic keys may be exempt.

Transparency and Risk Management

Munter's views align with the SEC's position, which asserts that SAB 121 aims to enhance transparency and improve risk management in the fast-evolving crypto industry. Despite these intentions, SAB 121 has sparked concerns within the industry as many view the regulation as an overreach by the SEC.

US lawmakers voted earlier this year to overturn the SEC's guidance, but President Joe Biden vetoed the repeal.

In response to Munter's speech, Peirce took to social media platform X to reiterate her concerns about both the content and process of SAB 121. She urged others to share their thoughts on the policy with her via email.

Industry Reactions

Nate Geraci, president of the ETF Store, commented that the SEC seems resistant to allowing regulated financial institutions to custody digital assets.

"The SEC appears to be making it more difficult for legitimate players to operate in the crypto space," he stated. Geraci's remarks echo a broader sentiment among industry participants who feel overly stringent regulations could stifle innovation.

The ongoing debate highlights the tension between regulatory bodies aiming to protect investors and the crypto industry seeking to innovate and grow. As the regulatory landscape evolves, all eyes will be on how the SEC balances these competing interests.