Ripple applauds Hester Peirce for blaming SEC over lack of fair notice

Rick Steves

“The Commission has refused, despite many pleas over many years, to provide regulatory guidance about how our rules apply to crypto-assets, so some of the responsibility for the lack of legal and regulatory clarity lies at our doorstep.”

The Securities and Exchange Commission has released a staff accounting bulletin regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users.

The bulletin reflects the staff’s evolving view on accounting for obligations to safeguard crypto-assets an entity holds for its platform users. The staff has determined that, because of risks particular to crypto-assets, affected companies should record a liability and corresponding asset on their balance sheets at fair value.

In support of this position, the staff highlights technological, legal, and regulatory risks associated with safeguarding crypto-assets, and “an increased risk of financial loss.”

“SEC refused to provide regulatory guidance for crypto”

In response to the staff accounting bulletin, SEC Commissioner Hester Peirce stated her concern, not with the accounting determination itself, which may be appropriate, but with the way the change is being made.

Commissioner Peirce first reminded those risks are not new and the SEC was already aware of that. Then, she moved to criticize the fact that the SAB does not acknowledge the Commission’s own role in creating the legal and regulatory risks that justify this accounting treatment.

“The Commission has refused, despite many pleas over many years, to provide regulatory guidance about how our rules apply to crypto-assets, so some of the responsibility for the lack of legal and regulatory clarity lies at our doorstep. Some recognition of the Commission’s own role in creating the conditions to which the staff points as justification for the SAB would be appropriate.”

Ripple’s General Counsel Stuart Alderoty shared Hester Peirce’s remarks on Twitter followed by a “fire” emoji, which probably stands for “burn” in this context.

Ripple is getting closer to summary judgment on fair notice as Judge Analisa Torres ordered both parties to agree on a briefing schedule. The defendants want opening briefs on May 22, but the plaintiff thinks “it’s premature” and is likely looking to extend the XRP lawsuit as much as possible as time is it’s best weapon against Ripple in this case.

The upcoming court ruling on the SEC’s motion for reconsideration, however, might change everything. A Ripple win means that the SEC will be forced to produce the very sensitive documents regarding Hinman’s 2018 speech. XRP Holders’ attorney John Deaton believes the SEC will rather settle than handing over such damning evidence.

It has been hinted that these files could contain an SEC analysis on XRP that concluded the digital asset is not a security.

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