Hester Peirce opposes new SEC proposal on crypto custody

The SEC commissioner has joined the Crypto Twitter discussion to criticize her agency’s most recent crypto proposal.

The US Securities and Exchange Commission Commissioner (SEC) Hester Peirce, who is no stranger to butting heads with her agency, on Feb. 15, called into question the most recent proposal from SEC Chair Gary Gensler concerning crypto custody in the United States. Peirce has been known to butt heads with her agency in the past.

Pierce cites skepticism about the SEC’s plan

Peirce, fondly referred to by many in the cryptocurrency business as “Crypto Mom,” expressed skepticism on the timeliness of the SEC’s plan, its workability, and the agency’s authority over the cryptocurrency market.

Peirce said in his writing that this regulation has extensive ramifications for investors, investment advisors, and custodians. Pierce asserted that they couldn’t do it perfectly without the insightful feedback of comments. She added that the public is not given sufficient time to examine and comment on the SEC plan, which was another point she made.

According to Peirce, this rule will take a significant amount of labor, and one year seems too short to achieve all of it. 

Next, the SEC commissioner cast doubt on the practicability of the regulation by stating that getting custodians to engage in written agreements to offer the needed “reasonable guarantees” may be challenging for advisors and expensive for customers.

Pierce: Gensler’s proposal is a risk to assets

Peirce continued by stating that the proposal made by Gensler carries the potential risk of causing investors to consider removing their investments from an institution that has formed safeguarding procedures for those assets, potentially putting those investments at a greater risk of loss. Gensler responded to Peirce’s statement by stating that his proposal does not carry this risk. She wrote that quoting wording from the agency’s plan would make client assets more susceptible to theft or fraud rather than less exposed.

As soon as the SEC made the idea public, cryptocurrency community members began to express their objections.

The SEC suggested amendments to the financial adviser custody rule that seem crafted to prohibit US firms from continuing to invest in US crypto companies. However, Jake Chervinsky, Chief Policy Officer at the Blockchain Association, believes these proposed changes seem designed to prevent US firms from investing in US crypto companies. 

In addition, individuals from bitcoin exchanges provided their feedback on the proposition.