US Senator Cynthia Lummis Scores a Win for Crypto with GAO Decision
United States Senator Cynthia Lummis has achieved a victory for the crypto industry with a recent decision by the Government Accountability Office (GAO). The GAO determined that the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 should undergo congressional review. This bulletin, released in March 2022, has been criticized by many pro-crypto lawmakers.
In August 2022, Lummis sent a letter to the U.S. Comptroller General, which prompted the GAO to consider whether the bulletin falls under the Congressional Review Act (CRA). Under this act, an agency rule must be submitted to the comptroller general and both chambers of Congress, allowing Congress to disapprove the rule. Using the definition of a rule from the Administrative Procedures Act (APA), the GAO concluded that the SEC bulletin is subject to the CRA. The GAO stated:
“It is reasonable to believe that companies may change their behavior to comply with the staff interpretations found in the Bulletin […] The Bulletin is also of future effect and was designed to interpret and prescribe policy. Accordingly, we conclude that the Bulletin meets the definition of rule under APA.”
The SEC’s Staff Accounting Bulletin 121
The SEC describes its Staff Accounting Bulletin 121 as expressing staff views on accounting for obligations related to safeguarding crypto-assets held by platform users. It clarifies that these statements are not official rules or interpretations from the Commission but rather represent staff practices and interpretations.
The bulletin provides guidance on accounting practices for platforms like Coinbase and PayPal that hold users’ crypto-assets. It advises these platforms to list users’ assets as liabilities and assets on their balance sheets at fair value during initial recognition. This represents a significant shift in accounting standards, as custodied assets were not previously recorded on balance sheets.
Hot Take: GAO Decision Challenges SEC’s Authority
The recent decision by the Government Accountability Office (GAO) to subject the SEC’s Staff Accounting Bulletin 121 to congressional review is a significant development for the crypto industry. This decision highlights the growing scrutiny of regulatory actions within the crypto space and emphasizes the need for proper oversight and accountability.
By determining that the bulletin meets the definition of a rule under the Administrative Procedures Act (APA), the GAO has called into question the SEC’s authority in issuing this guidance without following proper procedures. This decision could have broader implications for how regulatory agencies handle rulemaking in relation to cryptocurrencies and may lead to increased transparency and adherence to established processes.
Overall, this GAO decision is a win for crypto advocates who have been critical of the SEC’s approach to regulating the industry. It sets an important precedent and reinforces the importance of ensuring that regulatory actions are conducted in a fair, transparent, and accountable manner.
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