Peirce urges SEC rulemaking after interim wallet guidance

Commissioner Hester Peirce urged the Securities and Exchange Commission to begin formal rulemaking after the Division of Trading and Markets issued interim guidance clarifying when crypto wallets and user interfaces could meet the legal definition of a broker-dealer.

The Trading and Markets statement outlines a framework for ‘covered user interfaces’ — software that prepares and transmits blockchain transactions. It says some wallet-connected interfaces would not qualify as broker-dealers if they meet narrow conditions, including leaving users in control of transaction details, not soliciting trades and relying on objective routing and pricing mechanisms. The agency described the guidance as interim and noted it could be withdrawn within five years if the Commission does not adopt permanent rules through formal rulemaking.

Peirce welcomed the temporary clarity but wrote that staff guidance does not give lasting certainty to developers of self-custody wallets and other blockchain user tools. She argued temporary statements leave firms exposed to changing interpretations of the broker definition. ‘Crypto is forcing the Commission to confront its inner demons that have driven it toward ever more expansive readings of the securities laws,’ she wrote, and she urged the Commission to modernize the broker definition through full rulemaking.

The framework aims to separate neutral software providers from firms that execute trades, route orders, custody assets or provide investment advice — activities that remain subject to broker-dealer requirements. Industry participants have told the agency that unclear classification rules have slowed development of self-custodial wallets and decentralized finance front-ends. The SEC is requesting public comments to gather views on how broker definitions should apply to emerging blockchain technologies.

The result of any formal rulemaking will determine whether wallet providers and front-end tools are treated as neutral software or as regulated financial intermediaries subject to broker-dealer rules. Until permanent rules are adopted, companies building wallets and interfaces will operate under interim guidance and face compliance and enforcement risks tied to evolving staff interpretations and case-by-case application of the broker-dealer statute.