Peirce, popularly known as “Crypto Mom,” called the new guidance an example of the SEC’s “scattered and inefficient approach to cryptocurrencies.”
U.S. companies that safeguard their clients’ crypto assets received new accounting guidance on Thursday in the form of a Staff Accounting Bulletin from the Securities and Exchange Commission, or SEC. The guideline received a harsh response from SEC Commissioner Hester Peirce, a staunch supporter of cryptocurrencies.
Staff Accounting Bulletin 121 pointed out the high technological, legal and regulatory risks associated with the custody of crypto assets, in relation to traditional assets. These risks affect the operations and financial situation of companies such as Coinbase, PayPal and Robinhood, which guard users’ crypto assets and allow them to trade them on their platforms. For this reason, companies are advised to include in their accounting books the assets of their users as liabilities, as well as the assets at their fair value at the time of initial recognition.
In addition, the bulletin advises companies on the disclosure of the risks of crypto assets and reminds them of the existing regulations on disclosure.
Commissioner Peirce published a response to the bulletin the same day. She wrote, “My concern is not the accounting determination itself, which may be appropriate, but the manner in which the change is made,” which she characterized as:
“Yet another manifestation of the Securities and Exchange Commission’s scattershot and inefficient approach to cryptocurrencies.”
Peirce’s first objection to the bulletin was the timing of publication, as the bulletin cites an October 2020 report from the Attorney General, which in turn cites information from 2018. SEC staff have been reviewing the statements provided by the companies. in question every time since the 2020 report, Peirce noted.
Commissioner Peirce also noted that the bulletin “does not recognize the role of the Commission itself in creating the legal and regulatory risks that justify this accounting treatment” by failing to provide regulatory and legal clarity. Acknowledging his own role in the problem “would be appropriate,” Peirce said.
He noted that the guideline is very purposeful and very specific, and reads as if it were enforceable. But, as a staff statement, the newsletter is not executable. “If we are trying to encourage companies to enter our public markets, we should take a more deliberate approach to changing the rules, one that involves consulting with affected parties,” Peirce concluded.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.