Crypto assets may end up forcing regulators to modernize custody rules, SEC Commissioner Hester Peirce said Tuesday during a chat at CoinDesk’s Consensus 2021.
In a conversation revolving around best practices for financial advisors considering crypto assets for their clients’ portfolios, the second-term commissioner said advisors have a fiduciary responsibility to properly understand the asset class they’re advising their clients on and the regulatory guidance issued by the commission are stepping stones towards that.
Like other SEC commissioners, Peirce opened the session by noting that her comments were her own and in no way reflect the thinking of the regulatory body.
Peirce said custody is an especially important area when it comes to digital assets, but at the same time, applying existing custody rules isn’t that straightforward when it comes to this class of assets.
“The bottom line message I have is that we have work to do in modernizing our custody rules, all across the board,” Pierce said. “I think, as with many other areas, crypto may force us to do that modernization faster than we otherwise would do.”
Touching upon how language coming out of the SEC can often seem too cautionary, Pierce said that while it may seem like the agency is making a judgement on the asset class, it’s not really the SEC’s role to do so.
While Pierce herself has been an advocate for a calibrated approach towards crypto regulation, as highlighted in the latest version of her Token Safe Harbor proposal, recent comments and guidance from the U.S. Treasury department has raised concerns around stringent reporting requirements and a tightening of the regulatory noose around crypto assets.
Exchange Traded Funds (ETFs) have also been a long enduring dream for U.S. investors in the crypto space but the SEC indicated earlier this month that bitcoin’s volatility could mean that the digital asset is not yet ready to support an ETF.
During the chat Pierce said that “almost every day, someone asks me when a Bitcoin ETP?” and although she herself feels that the market infrastructure might be ready for one, she took a step back and added that the main issue is whether investors are being hurt by being forced to access the assets outside of the traditional securities realm.
“I would argue that we are. Not only because some of the products that people are using are less convenient and more expensive than an exchange traded product would be, but also that they can’t go to someone like an advisor and get help,” Peirce said.
While Peirce didn’t offer any comments on the possibility of an exchange traded product being approved or not, she said that approval for a crypto exchange traded product could also mean more retail investors and financial advisors may want to get in on the action.
“We’ll see what happens with our new chairman in place, as he starts to think about this issue with fresh eyes,” she said.
