Hester Peirce Talks Crypto At SEC

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Good morning from Global Custody Pro! Each week, we break down the most important developments in global custody, clearing, payments, and digital assets—so you don’t have to. Let’s dive into this week’s top stories.

Table of Contents

• 🌏 Global Custody News

• 🚀 Digital Asset News

• 📊 Chart Of The Week

• 📣 Quote of the Week

• 🎧 What We’re Listening To

• 📺 What We’re Watching

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🌏 Global Custody News

• ISDA Chief Executive Scott O’Malia said the proposed “Basel III endgame” capital rules risk harming market liquidity and raising costs excessively, calling for a recalibration of the framework to better reflect actual risk exposure. Speaking at ISDA’s Trading Book Capital event, he urged policymakers to address design flaws, including the high capital charges on client clearing and a lack of recognition for cross-product netting—factors he warned would undermine banks’ capacity to provide intermediary services and hamper the US Treasury market amid new clearing reforms. O’Malia cited ISDA analysis showing potential capital increases of more than 80% for client clearing businesses under the proposed rules and G-SIB surcharges, which he described as at odds with policymakers’ objectives to promote central clearing. He recommended adjustments to the market risk framework, as well as a permanent fix for the supplementary leverage ratio, to avoid constraining banks’ balance sheets during market stresses. Failure to address these issues, he said, would compromise deep and liquid markets and ultimately affect economic growth.

• Broadridge Financial Solutions reported strong second-quarter fiscal 2025 results, with total revenues increasing 13% to $1.59 billion, driven by a 9% rise in recurring revenues and record event-driven revenues. Diluted EPS surged 103% to $1.20, while adjusted EPS rose 70% to $1.56. Operating income jumped 69% to $211 million, with an improved margin of 13.3%. The company reaffirmed its fiscal 2025 guidance, expecting 6-8% recurring revenue growth, 8-12% adjusted EPS growth, and closed sales between $290-$330 million. CEO Tim Gokey attributed the performance to organic growth, acquisitions, and long-term market trends in investing and wealth management.

• SMBC Nikko Securities America, Inc., a U.S. unit of Japan’s SMBC Group, has been designated a primary dealer by the Federal Reserve Bank of New York, the company said on Friday, joining an elite group of 25 firms authorized to trade directly with the central bank on monetary policy operations. The designation allows SMBC Nikko America, part of the SMBC Group Americas Division, to act as a counterparty in US Treasury auctions, open market transactions, and provide market analysis to the New York Fed, bolstering its role in U.S. financial markets.

• The Financial Markets Standards Board (FMSB) has finalized a global industry standard to streamline the sharing of Standard Settlement Instructions (SSIs), aiming to cut costly settlement fails and boost efficiency as markets shift to faster settlement cycles like T+1. The framework promotes electronic solutions for pre-authenticated SSI management to enable straight-through processing, while providing standardized manual templates—developed with trade body ISITC and aligned with ISO 20022 taxonomy—for residual cases where automation isn’t feasible. The two-part standard, endorsed by regulators and major firms, includes core principles for governance and data-sharing channels, with FMSB members committed to adoption ahead of the UK and EU’s planned 2027 move to T+1. BlackRock’s Tim McLeod, who chaired the FMSB working group, called it “critical” for reducing errors as settlement windows tighten, while Bank of England’s Victoria Saporta noted its role in operationalizing post-trade reforms. The initiative builds on recommendations from a Bank of England-led post-trade task force, addressing SSIs as a leading cause of settlement failures amid manual processes and inconsistent data formats. Non-member firms are urged to adopt the standard to avoid lagging in market evolution.

🚀 Digital Asset News

• U.S. Securities and Exchange Commission (SEC) Commissioner Hester M. Peirce outlined plans for a newly formed Crypto Task Force aimed at providing clearer regulatory pathways for digital assets while maintaining anti-fraud protections. Peirce emphasized the SEC’s desire to end years of regulatory limbo by clarifying which tokens qualify as securities, offering potential safe harbors, addressing crypto-lending and staking programs, and exploring a “cross-border sandbox” for international projects. She stressed the agency’s ongoing coordination with other regulators, encouraged industry engagement, and underscored that no crypto asset holds an SEC endorsement. Peirce noted progress already made, including the rescission of Staff Accounting Bulletin 121, but said it will take time to resolve outstanding rule proposals and litigation.

• The U.S. Federal Deposit Insurance Corporation (FDIC) released 175 documents revealing the agency’s past supervisory stance toward banks pursuing crypto-related activities, which Acting Chairman Travis Hill criticized as overly cautious. The newly disclosed correspondence shows banks consistently facing resistance, lengthy delays, or directives to pause blockchain or crypto offerings. Hill, who previously faulted the FDIC for sending a message that it was “closed for business” on crypto, said the agency is now re-evaluating its supervisory approach, aiming to replace existing guidance and provide a viable path for institutions interested in digital assets while maintaining safety and soundness standards. He added the FDIC would coordinate with the President’s Working Group on Digital Asset Markets, established by a January 23, 2025, executive order.

• Artificial intelligence (AI) is increasingly being weaponized by criminal enterprises to amplify cyberattacks, fraud, and disinformation, posing significant risks to global security and financial systems, according to a TRM Insights report. Cybercriminals leverage AI to automate phishing, optimize ransomware, create synthetic identities, and spread tailored disinformation, with documented cases of voice-mimicking CEO fraud and dark web AI-generated exploitative content. To counter these threats, the report urges a multi-pronged approach combining AI-driven detection tools, regulatory frameworks like the U.S. Treasury’s AI risk guidelines, public education campaigns, and global collaboration.

📊 Chart Of The Week

📣 Quote of the Week

🎧 What We’re Listening To

📺 What We’re Watching

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