- Hester Peirce departed the Securities and Exchange Commission on Friday after eight years as a commissioner, leaving for a role in academia. She has led the agency Crypto Task Force since January 2025, which has issued interpretations, guidance and no-action letters that accelerated digital asset growth.
- On Thursday, in her final days, the SEC issued a proposal that would allow investment advisers to custody digital assets. Peirce said advisers have been operating without clear rules on how and where crypto could be held, often without viable qualified custodians available, waiting for workable custody rules.
- Her tenure culminated in the innovation exemption issued September 17, permitting digital versions of securities to trade in the US. That measure had been delayed while the SEC, White House and much of the financial industry waited on a crypto market structure bill, which the Senate blocked last month.
- Her exit leaves the SEC with just two of five members. Earlier this week the agency issued an administrative rule allowing it to continue functioning with a single commissioner.
What Happened?
SEC Chairman Paul Atkins praised Peirce policymaking at a commission meeting this week, saying the agency is putting those principles into practice for investors, innovators and the economy. Peirce, dubbed Crypto Mom by the industry years ago, said in a June interview after announcing her departure that regulators need to be willing to deal with change and should treat regulation as something that accommodates new entrants rather than as static. As one of three Republicans on what is designed as a bipartisan five-member panel, she consistently supported a broader agenda that includes scaling back issuer disclosure requirements and expanding retail access to private markets.
Why It Matters?
A commission operating with two members, having just adopted a rule permitting it to function with one, is making far-reaching changes to American market regulation. That is the detail with the longest consequences and it receives the least attention. Rules adopted by a minimally constituted commission are more exposed to legal challenge and more easily revisited once vacancies are filled, which compounds a durability problem already visible across this agenda: the innovation exemption runs five years, the CFTC acted through staff guidance that expires on its own terms, and Congress declined to legislate. Firms building businesses on this framework are building on foundations that successive commissions can revisit. The custody proposal is the item that matters most to wealth managers and it is buried beneath the personnel story. Registered investment advisers are bound by qualified custodian requirements, so an adviser cannot allocate client assets to something it has no compliant way to hold. Peirce own description of advisers holding on without clear rules is an admission that those allocating to digital assets have been operating in an unresolved area. A formal proposal starts a comment period and eventually produces rules, and those rules determine whether advisory allocation to crypto becomes routine. The timing is awkward in one respect. The architect of this programme has left while its central pieces remain proposals rather than final rules, which removes the internal advocate at the point where industry comment and competing interests shape outcomes. Traditional finance and the crypto industry have already clashed over custody, and that contest will now be resolved without her.
What Next?
The custody proposal comment period is the near-term process, and the definition of a qualified custodian is the provision advisers should read closely. Watch how quickly commissioner vacancies are filled, since a two-member agency is unusual and the composition will determine whether this agenda is finalised or revisited. Any legal challenge to rules adopted at minimal quorum would test the administrative rule issued this week. Beyond crypto, the proposals to reduce issuer disclosures and expand retail access to private markets are the broader deregulatory items with direct relevance to private wealth, and both are worth tracking through to final rules. For advisers currently holding digital assets for clients, the practical step is reviewing custody arrangements against the proposal before the rules are set.
Affected Tickers and Coins: COIN, CRCL, HOOD
Source: Bloomberg
