Peirce is the leader of the SEC’s new crypto task force, which it launched Jan. 21, and the agency has already signaled a reverse in course from its previous approach to crypto. On Feb. 27, the commission dismissed its lawsuit against crypto company Coinbase, and prior to that, on Jan. 23, the agency rescinded guidance that made it harder for banks to provide custody services for digital assets.
However, the lawmakers called for the agency to withdraw two other proposals and one piece of guidance related to crypto.
One of those proposals, issued in February 2023, would amend the agency’s existing custody rule and expand the scope of assets subject to custodial oversight to include crypto, among other nontraditional assets. Specifically, the proposal would require investment advisers to maintain crypto and other assets with a qualified custodian, though many opposed the proposal, and it’s yet to be finalized.
At the Investment Adviser Association’s annual compliance conference in Washington last week, Peirce promoted the idea of an initiative on crypto custody, separate from the agency’s 2023 proposal, saying, “there are some unique issues around crypto and custody.” Natasha Vij Greiner, director of the SEC’s division of investment management, supported Peirce's idea, though both said the decision would ultimately be up to the next chair of the SEC.
President Donald Trump’s nominee to lead the agency, Paul Atkins, is expected to be more friendly toward the crypto industry, though he has to be confirmed by the Senate, and his confirmation hearing is yet to be scheduled.
The lawmakers also called for the SEC to withdraw a proposal that would expand the definition of an “exchange” under the Securities Exchange Act of 1934. Issued in January 2022, the proposal would broaden the definition to include systems that trade Treasuries and other government securities, requiring those systems to register as national securities exchanges or broker-dealers and comply with Regulation ATS for alternative trading systems.
When the agency reopened the proposal’s comment period in April 2023, it also highlighted how existing rules apply to platforms that trade crypto asset securities, including decentralized finance systems, and included supplemental information and economic analysis for such systems that would be included in the new definition of an exchange.
“This proposal threatens to subject decentralized finance protocols, and potentially even software developers, to the onerous regulations applicable to securities exchanges, without a legitimate pathway to compliance,” the lawmakers wrote in their letter.
In addition, the House Republicans called for the SEC to update 2019 guidance it issued, which lays out a framework for determining when a digital asset constitutes an investment contract, meaning it falls under federal securities laws.
Through the work of the agency’s crypto task force, the lawmakers said they’re “confident the SEC will have the necessary clarity to update this guidance and account for any ambiguity or uncertainty when determining whether a digital asset qualifies as a security.”
The Republicans ended the letter by stating that they “stand ready to support the SEC by advancing legislation that establishes a clear legal framework for digital asset classification.”
