SEC Commissioner Hester Peirce Voices Ongoing Reservations Regarding the SEC’s Staff Accounting Bulletin No. 121 (SAB 121)

Her remarks followed a speech on September 9 by SEC Chief Accountant Paul Munter, who reiterated that there has been no change in the Commission’s perspective

SEC Commissioner Hester Peirce continues to voice her concerns regarding the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121).

Her remarks come after a speech by SEC Chief Accountant Paul Munter on September 9, where he stated that there has been no change in the Commission's perspective on SAB 121.

Peirce highlighted Munter's remarks, which noted that the SEC staff continues to support the guidelines of SAB 121 amid increasing scrutiny.

The regulation mandates entities to include a liability on their balance sheets, which represents their obligation to secure digital assets that are held on behalf of others.

According to Munter, this method ensures that investors receive relevant and timely data to evaluate the risks associated with the custody of cryptocurrencies for others.

He also mentioned certain exceptions, such as bank-holding companies that provide crypto custodial services with bankruptcy protections may not have to recognize such liabilities.

Similarly, broker-dealers that manage crypto transactions without controlling the cryptographic keys could also be exempt from this requirement.

Recently, Peirce criticized her own agency's approach to cryptocurrency regulation, stating that difficulties in applying the Howey test—a long-standing method to determine what qualifies as a security—have led to a climate of regulatory uncertainty and confusion within the industry.

Despite these objectives, SAB 121 has been met with considerable apprehension within the industry, with many stakeholders regarding it as an overextension of the SEC’s regulatory authority.

Earlier in the year, US lawmakers passed a vote to rescind the SEC’s guidelines, but this attempt was ultimately thwarted by a President Joe Biden veto.

Following Munter’s speech, SEC’s Commissioner Hester Peirce expressed her ongoing concerns about SAB 121 on the social media platform X.

She encouraged the public to email her their views on the policy, seeking broader input.

Nate Geraci, president of the ETF Store, also weighed in, remarking that the SEC appears to be hesitant to permit regulated financial institutions to custody digital assets, indicating a cautious or restrictive approach by the regulatory body.

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