- SEC Commissioners Peirce and Uyeda emphasized that most crypto assets are not securities, challenging prior regulatory assumptions.
- Peirce compared crypto regulation to a chaotic game, urging clarity to prevent stifling innovation and market growth.
- Uyeda called for revising custody rules and frameworks, advocating for a more practical approach to crypto asset regulation.
At today’s Crypto Roundtable at the SEC, Chairman Paul Atkins emphasized the need for updated regulations surrounding digital assets. While his speech set the stage for broader policy discussions, Commissioners Hester Peirce and Mark Uyeda took a more critical stance—highlighting ongoing gaps in crypto custody rules and the regulatory uncertainty hindering market growth.
Peirce’s Push for Clarity in Crypto Custody
Peirce, the head of the crypto taskforce team, compared the current state of crypto regulation to the chaotic kid’s game “the floor is lava”. She said companies are forced to jump between poorly illuminated regulatory spaces, always avoiding direct contact with crypto assets to avoid legal jeopardy—a reality that makes compliance nearly impossible.
The Commissioner also warned that investment firms are stuck in a confusing landscape, unsure whether cryptocurrency assets are securities, who qualifies as a custodian, and whether staking or voting rights violate custody rules. Without clarity, firms risk missing opportunities, and investment companies hesitate to enter the space.
Peirce also argued that now is the time to set the stage for regulatory guidance, enhance investor protection, rather than impair market growth. She emphasized self-custody as a viable option, pointing out that blockchain itself offers tools—like smart contracts—that could help mitigate risks better than traditional finance systems.
Uyeda’s Focus on Competition and Custodial Options
Meanwhile, Commissioner Mark Uyeda, who up until recently was serving as Acting Chair of the SEC, focused on competition and qualified custodians within the cryptocurrency realm. He raised a key issue—can investment advisors use state-chartered limited-purpose trust companies to custody crypto assets as fiduciaries?
He pointed out that state regulators like New York’s “Department of Financial Services” already oversee financial firms that could serve this function, arguing that this should be explored as an alternative to federally chartered banks.
Uyeda also called for revising the SEC’s special-purpose broker-dealer framework, suggesting that firms need clearer rules to custody both traditional securities and crypto assets. He stressed that codified regulatory amendments may be necessary to ensure firms can safely and legally operate.
Finally, the Commissioner tackled a lingering issue from the prior administration—the assumption that most crypto assets are securities.
“The position of the prior Administration that most crypto assets are likely to be funds or securities has led many advisors to shoehorn all kinds of crypto assets into qualified custody,” Uyeda said.
He argued that this forced advisors to apply qualified custody rules too broadly, limiting investment opportunities. Echoing Peirce, he stated that many crypto assets are not securities and called for the SEC to clarify whether some should even be categorized as “funds” under the custody rule.
“I agree with Commissioner Peirce that a large number of crypto assets are not likely to be Securities,” he said. “But the term ‘funds’ is not defined in the serial, and the commission may need to clarify whether any crypto assets constitute funds for purposes of the rule.”
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