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Lawmakers are making efforts to overturn a controversial SEC accounting bulletin that restricts companies from holding crypto assets on behalf of their clients.
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Senators Cynthia Lummis (R-Wyo.) and Representatives Wiley Nickel (D-N.C.) and Mike Flood (R-Neb.) have introduced resolutions in the Senate and House of Representatives that aim to formally disapprove of the SEC’s rule requiring companies to hold client crypto assets on the company’s balance sheet.
The SEC’s 2022 staff accounting bulletin No. 121, or SAB 121, imposed a burdensome requirement on companies that want to hold crypto, potentially increasing their capital requirements. This change has drawn a significant backlash from the digital asset industry.
GAO found that the SEC did not follow proper procedures
When a federal regulator issues guidance, it is generally expected to be an advisory on understanding and interpreting existing policy. However, last year, the Government Accountability Office (GAO) found that the SEC did not follow proper procedures when issuing this policy. Members of Congress are now initiating an effort under the Congressional Review Act to nullify this rule.
“When the SEC issued SAB 121, it did so without consulting with other regulatory authorities and without going through the notice and comment process, even though the accounting standard would have implications for the treatment of financial institutions’ customer assets,” said Rep. Flood. “Congress needs to act as a check on regulatory overreach.”
Crypto lobbying groups are supporting this effort. “Requiring custodians to have an equal asset on their balance sheet as a liability means that for every $100 they hold, they must also hold $100 in a similar asset on their balance sheet,” said Chamber CEO Perianne Boring. “This onerous requirement has discouraged institutions from offering digital asset custody options.”