On Wednesday, U.S. Securities and Exchange Commissioner Hester Peirce, who many affectionately call “crypto mom,” issued a statement that raised doubts about the recent proposal made by SEC Chair Gary Gensler and the SEC regarding cryptocurrency custody in the United States.

"The Commission acknowledge[s] that an agreement between the custodian and the adviser would be a substantial departure from current industry practice." Peirce wrote in the statement.

“My first set of concerns is around timing. This rule has broad implications for investors, investment advisers, and custodians, ” Peirce wrote in the statement.

However, "Comments are due sixty days after publication in the Federal Register, which does not allow the public enough time to analyze all aspects of this proposal, particularly in light of the already loaded rulemaking docket. " Peirce added.

“This rule will require a lot of work, and a year seems too short to accomplish all of it,” Peirce said. “I appreciate the extended time for smaller advisers, but even eighteen months seems like an aggressive timeline for the changes contemplated here.”

Peirce's second concern is the rule’s workability. "Getting custodians to enter into written agreements and provide the required reasonable assurances may be difficult for advisers and costly for clients. " Peirce stated. 

"The Commission recognizes that a pact between the custodian and the advisor would deviate significantly from the present industry norms." Peirce said, adding that the proposition would broaden the scope of custody regulations to cover cryptocurrency assets, while simultaneously reducing the number of eligible cryptocurrency custodians.

Peirce went on to question crypto custody. Gensler’s proposal runs the risk of “causing investors to remove their assets from an entity that has developed safeguarding procedures for those assets, possibly putting those assets at a greater risk of loss,” This would make customer assets more vulnerable to theft or fraud, not less, she wrote, citing language from the agency’s proposal.

“In what is becoming something of a habit, the Commission is once more proposing to dictate contract provisions involving entities the Commission does not regulate,” Peirce stated. “The Commission does not have authority to regulate custodians directly, but we propose to regulate them indirectly. Given our lack of regulatory authority, who would be on the hook if a qualified custodian failed to satisfy these requirements?”