Bipartisan U.S. Lawmakers Seek to Overturn SEC Crypto Custodian Rule
A group of bipartisan U.S. lawmakers are aiming to repeal a Securities and Exchange Commission (SEC) accounting standard that imposes restrictions on crypto custodians. Sen. Cynthia Lummis (R-WY) and Reps. Wiley Nickel (D-NC) and Mike Flood (R-NB) introduced a joint resolution in the Senate and House of Representatives to overturn SEC Staff Accounting Bill (SAB) 121.
SAB 121 Issued Without Consultation
In a press release, Lummis highlighted that the Government Accountability Office (GAO) identified SAB 121 as a rule under the Congressional Review Act, stating that it was issued without consultation with Congress or the GAO, making it unenforceable.
Accusations of Overreach
Flood accused the SEC of overreach for going beyond the scope of an accounting bulletin, while Nickel criticized Gary Gensler and the SEC for exceeding their authority. They believe it is time for Congress to intervene on SAB 121.
SAB 121 Impact on Custodial Services
SAB 121, enacted in March 2022, requires companies holding cryptocurrency custody to report a liability and corresponding assets on their balance sheets. The American Bankers Association expressed concern over this rule as it deviates from traditional accounting treatment for custodied assets, potentially impacting the banking industry’s ability to provide safe custody of digital assets. The Securities Industry and Financial Markets Association also noted that SAB 121 disincentivizes banks from offering custodial services for digital assets.
SEC Facing Pushback
The SEC has faced criticism from lawmakers and the judiciary regarding its approach to crypto. In January, the regulator reluctantly approved several spot Bitcoin ETFs following a court order. U.S. District Judge Katherine Polk Failla also questioned the SEC’s interpretation of securities laws towards digital assets. Recently, the SEC filed to dismiss its lawsuit against Debt Box after facing sanctions for false representations in the case.
Hot Take: Bipartisan Efforts to Challenge SEC Crypto Custodian Rule
A bipartisan group of U.S. lawmakers has introduced a resolution seeking to repeal an SEC accounting standard that imposes restrictions on crypto custodians. The lawmakers argue that the rule, known as SAB 121, was issued without proper consultation and goes beyond the scope of an accounting bulletin. They believe that enforcing this rule would grant the SEC regulatory authority over institutions without congressional authorization. Critics of SAB 121, including industry bodies and banking associations, argue that it deviates from traditional accounting treatment for custodied assets and disincentivizes banks from offering custodial services for digital assets. The SEC has faced pushback from both lawmakers and the judiciary in recent months over its approach to crypto regulation.
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