In a move potentially boosting the crypto industry, members of Congress are pushing to scrap a contentious SEC accounting rule.
Senators Lummis (R-WY) and Representatives Nickel (D-NC) and Flood (R-NE) are leading the charge with resolutions challenging the rule’s validity, arguing it unfairly restricts companies from safely holding customer crypto assets.
In 2022, the SEC released Staff Accounting Bulletin No. 121, often referred to as SAB 121, which mandated that companies holding their clients’ cryptocurrencies must include them on their financial statements.
This requirement could potentially oblige banks interested in cryptocurrency custody to maintain what they consider to be a burdensome level of capital to mitigate associated risks. This decision sparked significant outrage within the digital assets industry.
When a federal regulator releases staff guidance, it is intended to provide advice on interpreting and comprehending existing policies. However, when an agency improperly utilizes such guidance to establish new policies, it can often provoke the disapproval of Congress.
This was precisely the conclusion reached by the Government Accountability Office (GAO) last year, asserting that the SEC should have formally presented this new policy to legislators and followed the necessary procedures mandated for the agency when introducing a new rule.
Lawmakers employed the Congressional Review Act to initiate a resolution aimed at overturning the SEC’s actions. Spokespeople for the SEC did not immediately respond to requests for comments regarding this recent opposition to the bulletin.
Rep. Flood stated :
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. In the face of overreach by a regulator, it is the role of Congress to serve as a check.”
Crypto lobbying organizations, including the Chamber of Digital Commerce, commended this endeavor.
Chamber CEO Perianne Boring stated :
“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. This stringent requirement has proven to deter institutions from offering digital asset custody options.”
Lummis revealed to CoinDesk TV that discussions concerning long-awaited legislation to establish regulatory guidelines for U.S. stablecoin issuers are currently in a “rather delicate” phase. She further explained that negotiations are taking place daily, involving not only Democrats and Republicans but also bridging discussions between the U.S. Senate and the House of Representatives.
Lummis also expressed optimism that the United States may witness the introduction of stablecoin legislation within this year, with the possibility of it occurring in the early part of the calendar year. She pointed out that as the calendar year progresses closer to elections, it becomes increasingly challenging to engage members of Congress in addressing complex legislative matters, as their focus shifts towards re-election efforts and maintaining their party’s majority.