The Government Accountability Office Calls for Congressional Review of SEC Crypto Guidance
The Government Accountability Office (GAO) has stated that the Securities and Exchange Commission (SEC) must submit its guidance on how firms should account for holding cryptocurrency to Congress before it can become effective. The SEC’s Staff Accounting Bulletin No. 121 (SAB 121), issued in March 2022, requires companies that custody crypto to record customer crypto holdings as liabilities on their balance sheets.
The GAO asserts that the bulletin falls under the Congressional Review Act (CRA), which mandates that agencies submit a report on the rule to Congress before it can take effect. This allows Congress a 60-day window to review and potentially disapprove the rule.
Crypto Pushback
The SEC’s bulletin has faced criticism from crypto advocates. SEC Commissioner Hester Peirce, known for her pro-crypto stance, expressed concerns about the bulletin, stating that it reads as if it is enforceable despite being a staff statement. In response, a group of bipartisan lawmakers introduced a bill last month to prevent federal agencies from requiring institutions to list custodial assets as liabilities.
Response from the Crypto Industry
The crypto industry has responded to the GAO’s call for congressional review. Cody Carbone, Vice President of Policy at the Chamber of Digital Commerce, accused the SEC of gaslighting the GAO and called it a blow to the SEC. Jake Chervinsky, Chief Legal Officer at venture fund Variant, urged the SEC to withdraw SAB 121 and claimed that the agency broke the law.
The SEC has not yet commented on the matter.
Hot Take: The Government Accountability Office Calls for Congressional Review of SEC Crypto Guidance
The Government Accountability Office’s call for congressional review of the SEC’s guidance on accounting for cryptocurrency custody has significant implications for the crypto industry. This move emphasizes the need for regulatory clarity and oversight in the evolving crypto space. The outcome of the review process will determine whether companies will be required to record customer crypto holdings as liabilities, potentially impacting their financial statements and capital requirements. Crypto advocates are hopeful that Congress will disapprove the rule, providing relief to custodial institutions. The GAO’s action highlights the ongoing debate surrounding crypto regulation and showcases the influence that lawmakers have in shaping the future of this emerging asset class.
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