The Securities and Exchange Commission has recently issued new accounting rules for cryptocurrency custodians. A bipartisan group of congressional leaders is working together to reverse these standards.
Cynthia Lummis (R-Wyo. ), Mike Flood (R-Neb. ), and Wiley Nickel (D-N.C.) issued a resolution on Thursday to repeal SAB 121, the Staff Accounting Bill of SEC.
SAB 121 was introduced in March 2020 and passed in April. It states that custodians of digital assets should declare a liability. “corresponding assets” On their balance sheet. SEC staff stated that the practice was intended to safeguard against fraudulent transactions. “significant risks and uncertainties associated with safeguarding crypto assets.”
The Government Accountability Office found earlier this year that SAB 121 was issued by the SEC in violation of the Congressional Review Act. Later, the SEC countered by stating that SABs do not have to adhere to CRA as they are not rules.
Hester Peirce – a well-known friend of the crypto industry – criticized this bulletin. She argued that the SABs are not sufficient to provide guidance.
“If we are trying to encourage companies to enter our public markets, we ought to embrace a more deliberate approach to changing rules — one that involves consulting with affected parties,” Peirce wrote this in March of 2022.
SABs fall under the securities laws, and are neither rules nor do they reflect an official endorsement by all Commissioners. Instead, SABs serve as a tool for the agency’s staff to use in interpreting and implementing policies. SABs are not subject to public notification or comment periods, unlike traditional agency rules.
Gary Gensler, SEC chair Gary Gensler’s deputy in December 2023, defended SAB-121 by saying that it was “just a staff accounting bulletin,” The precedents set by the US bankruptcy court are consistent.
“It basically addresses whether liabilities should be on balance sheet, and what we have found actually in bankruptcy court, time and again, many times now, that indeed bankruptcy courts have said that crypto assets are not bankruptcy remote,” Gensler made the statement during an appearance by American Bar Association in December 2023.
To become law, joint resolutions must be presented and passed by both chambers.
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