On 30 September 2025, United States SEC Commissioner Hester M. Peirce addressed the Digital Assets Summit in Singapore, delivering remarks titled “Cultivating Confidence: The Role of Custody in Institutional Confidence – Public Trust and Oversight.” Commissioner Peirce spoke on the challenges of crypto custody and the urgent need for clarity in regulatory treatment of custodians. She emphasised that investor trust depends on effective and adaptable custody frameworks, not outdated prescriptions. The Commissioner discussed how restrictive regulatory steps, such as the US SEC’s Staff Accounting Bulletin No. 121 and the Special Purpose Broker-Dealer framework, hindered market participation. Peirce urged regulators to consider principles-based custody frameworks and recognise technological solutions like blockchain transparency and smart contracts. She reaffirmed that fostering investor confidence requires balancing regulatory oversight with commercial reality.
Commissioner Peirce’s speech examined how regulatory uncertainty in the United States affects institutional confidence in crypto custody. She outlined the evolution of the US SEC’s approach to custody, from the 2020 Special Purpose Broker-Dealer (SPBD) framework to the 2025 reversal of Staff Accounting Bulletin 121 through Staff Accounting Bulletin No. 122. The Commissioner warned that over-regulation could restrict access to qualified custodians and drive investors towards unregulated markets. She encouraged collaboration through the US SEC’s Crypto Task Force, which continues to engage public feedback on custody frameworks.
“A trustworthy custodian protects customer assets from loss, destruction, and theft and is subject to a framework for protecting customer assets from creditors of the custodian and from competing claims by other customers if the custodian fails.”
“Keeping pace may mean grounding rules in principles, rather than attempting to prescribe custodial practices.”
Regulatory Background and Proposals
The Commissioner referred to multiple US SEC initiatives that shaped the custody landscape.
She stated: “The SEC’s Special Purpose Broker-Dealer framework for the custody of digital asset securities, for example, proved virtually unusable due to unrealistic constraints.”
She noted that “Staff Accounting Bulletin 121… made custodying crypto assets commercially impracticable for companies that could not afford the capital charges associated with having custodied assets on balance sheet.” Peirce welcomed the reversal through Staff Accounting Bulletin 122 in January 2025, but cautioned that bank capital regulations may still deter traditional custodians from entering crypto custody.
Principles-Based Approach and Technological Integration
Peirce advocated a flexible framework that accommodates blockchain technology, self-custody, and smart contracts. She said: “Perhaps registrants should be able to use custodians other than traditional financial institutions. Perhaps advisers with the technical ability to do so should be able to custody crypto assets themselves.” She showcased that distributed ledger technology can “mitigate information asymmetry and allow investors to verify assets held by a custodian in real-time.”
Conclusion
Commissioner Peirce’s remarks show towards a jurisprudential shift from prescriptive to principles-based regulation, rooted in the need for commercial practicality and technological adaptability. Her position signals that the future of United States custody regulation in digital assets may depend on redefining what qualifies as a “custodian” under the Investment Advisers Act and related securities laws.
