Members of Congress are trying to delete the controversial U.S. Securities and Exchange Commission accounting bulletin that implies restrictions on companies that want to hold their customer's crypto assets.
Sen. Cynthia Lummis (R-Wyo.) and Reps. Wiley Nickel (D-N.C.) and Mike Flood (R-Neb.) introduced matching resolutions in the Senate and House of Representatives on Thursday that would formally disapprove of the accounting rule and conclude that it has no legal force.
The SEC's 2022 staff accounting bulletin No.121, commonly known as SAB 121, held that a company keeping a client's cryptocurrencies should do so on the firm's own balance sheet – which could force banks seeking to hold crypto to maintain what they'd view as an onerous amount of capital to compensate for the risk. The move was greeted with an uproar from the digital assets sector.
When a federal regulator issues staff guidance, it's supposed to be advice on how to understand and interpret existing policy. When an agency inappropriately uses guidance to set new policy, that often raises the ire of Congress. And that was the finding of the Government Accountability Office last year, that the SEC should have forwarded this policy to lawmakers and gone through the other hoops required of the agency when it issues a new rule.
The lawmakers issued the resolution under the Congressional Review Act in an effort to repeal the SEC's work.
Spokespeople for the SEC didn't immediately respond to a request for comment on the latest opposition to the bulletin.
"The SEC issued SAB 121 without conferring with prudential regulators despite the accounting standard’s effects on financial institutions’ treatment of custodial assets, and the SEC issued SAB 121 without going through the notice-and-comment process," said Rep. Flood, in a statement. "In the face of overreach by a regulator, it is the role of Congress to serve as a check."
Crypto lobbying groups, such as the Chamber of Digital Commerce, praised the effort.
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"Mandating custodians to maintain an equal asset on the balance sheet as a liability, it demands parity, meaning for every $100 in bitcoin held, $100 in a similar asset must also be held on the balance sheet," Chamber CEO Perianne Boring said in a statement. "This stringent requirement has proven to deter institutions from offering digital asset custody options."
