Our pick of this week’s stories in crypto.

Hester Peirce dissents

As we reported at length yesterday, commissioner Hester Peirce said remarks from the SEC were “nothing but crickets” in a sweeping criticism of the regulator’s approach.

Peirce described Staff Accounting Bulletin (SAB) 121 as a particularly pernicious weed that had sprung up in the secret garden as she aired her views at the SEC Speaks event that took place Tuesday and Wednesday. The agenda covered corporation finance, examinations, enforcement, and accounting.

Continuing her trend of dissent towards the SEC on its crypto stance, Peirce moved from criticism of SAB 121 to what she called the “dwindling of genuine Commission and staff engagement with the public”.

SAB 121 was introduced in 2022, to add interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for their platform users.

“The registration process too often involves unpredictable timelines, inconsistent comments, and an unprecedented lack of transparency.”

Hester Peirce, SEC Commissioner

“The Commission should think about each rule proposal as an opportunity to foster a public discussion with the goal of developing the best solution to a carefully identified problem, not as the opening bid in a hard-driving negotiating strategy designed to force a cowed public to accept a slightly less onerous – though perhaps still unworkable – final rule,” said Peirce.

She also said the Commission had become unapproachable, with countless people saying they are no longer comfortable speaking to staff: “Interactions that do occur often are an interminable round of unproductive monologues before an unresponsive audience. Even processes that historically have been straightforward, such as filing for new funds, have become complicated. The registration process too often involves unpredictable timelines, inconsistent comments, and an unprecedented lack of transparency.

“A fund sponsor might receive dozens of comments on a filing for a fund when the only distinction from an existing fund is the asset class in which it invests. Product ideas are abandoned before they are submitted to the Commission staff for consideration or after multi-year processes produce nothing but large legal bills and a loss of confidence in the Commission.”

Grewal highlights SBF case

SEC Director of Division and Enforcement Gurbir S Grewal spoke at the same event, defending the SEC’s position.

In some parts of his speech that could be hard to interpret, he reiterated the SEC’s clear and consistent application of the Howey test with regards to crypto.

“The victim statements reflect the incredibly broad cross-section of people who were harmed by the fraud that Bankman-Fried was convicted of: single parents, retirees, young people, grandparents.”

Gurbir Grewal, Director of Division and Enforcement, SEC

“Even parties that argue in court that their conduct does not implicate the federal securities laws have themselves used the Howey framework internally for years to evaluate crypto offerings,” he said.

“Of course, that doesn’t mean that all crypto products are offered as “investment contracts” and are therefore securities. But it does mean that the analytical framework – the test – for whether something is an “investment contract” is the same whether we’re dealing with transactions involving crypto products or with transactions involving the many other kinds of offerings that courts have analyzed under Howey.”

He referenced the Sam Bankman-Fried case as evidence of why the industry was generally untrustworthy.

“The victim statements reflect the incredibly broad cross-section of people who were harmed by the fraud that Bankman-Fried was convicted of: single parents, retirees, young people, grandparents,” Grewal said.

“People who were forced to sell their home, their car, or take on a second job to make up for their losses. People who had to figure out a way to pay for their mortgage, education, retirement, and so on.”

Crypto.com launching in South Korea

The Crypto.com App will launch in South Korea on April 29, enabling the country’s 52 million citizens to trade in the app.

Crypto is relatively popular in South Korea, with 20% of the population owning or using cryptoassets in 2023, according to Statista data.

South Korea has a handful of domestic exchanges and Crypto.com will be the first foreign one in the market. The country’s government began regulating crypto in 2017.

Under the Korean legal system, cryptocurrency exchanges are required to forge a partnership with commercial banks to authenticate the real-name accounts of exchange customers.

“South Korean regulators are thoughtfully advancing the sector and we look forward to continuing to collaborate with them to help grow the industry responsibly,” Eric Anziani, President and Chief Operating Officer, Crypto.com, said.