US Republican lawmakers from both chambers have formally requested the Securities and Exchange Commission (SEC) to repeal its controversial Staff Accounting Bulletin No. 121 (SAB 121). This move comes ahead of tomorrow’s scheduled SEC oversight hearing.
House Financial Services Chair Representative Patrick McHenry and Senator Cynthia Lummis lead the letter. They argued that SAB 121 was inappropriately imposed without proper procedure, violating the Administrative Procedure Act.
SEC faces bipartisan backlash
As per the letter , Lawmakers stressed the point that SAB 121 was issued without consulting any of the prudential watchdogs. It requires firms custodying crypto assets to record them as liabilities on their balance sheets. This has triggered criticism from both parties for stifling financial innovation and weakening consumer protections.
Lawmakers stated that both the House and Senate vote on H.J. Res. 109 sent a clear message from Congress to the SEC. This signals a widespread discontent with the SEC’s overreach . The House and Senate, in rare agreement on crypto, made it clear that policy changes via staff guidance are unacceptable.
13 senators and 29 House members had signed the letter to take on the SEC’s shaking ground over crypto assets. Many lawmakers are from key committees like House Financial Services and Senate Banking. The united effort taken by rule-makers shows the importance of proper legislative channels in order to form safer and clearer regulatory changes.
However, Legislators are frustrated over the SEC’s chief accountant’s recent statement where he acknowledged that some companies had been exempted from SAB 121’s requirements. This has led to confusion of inconsistent application of rules.
Earlier, US President Biden had vetoed a bill to overturn SAB 121. At that time, he expressed openness to crafting a comprehensive and balanced regulatory framework for digital assets in cooperation with Congress. The message that came out was that reform is possible, but it needs to be done thoughtfully.
Is the SEC bypassing rules?
Eleanor Terrett, a Fox Business journalist, reported that Republicans had addressed the closed door consultations which the SEC accounting staff had with certain institutions and broker-dealers. This includes granting them exemptions from SAB 121’s reporting requirements, as described by the agency’s chief accountant.
She inquired why the SEC commissioners are allowing accounting staff to pick winners and losers in the crypto custody space and that too while avoiding the Administrative Procedure Act and official rule making process.
Terrett highlighted that the Commission’s website states that views of the staff and staff bulletins (like SAB 121) are not interpretations of the Commission nor have the Commission’s official approval.
