Crypto regulation strongly animates the political environment in the United States. American representatives challenged the SEC by introducing a resolution to repeal SAB 121. This regulation would indeed present risks for both crypto custodian banks and consumers.
SAB 121 deemed unfair to financial institutions
Some American representatives introduced a resolution to repeal Staff Accounting Bulletin 121 (SAB 121) of the SEC. This is a bulletin that restricts banks wishing to hold their clients’ crypto assets. This forces them to keep their investors’ assets on their balance sheet.
Among these representatives, we find members of Congress Mike Flood, Wiley Nickelas well as senator Cynthia Lummis. Their requestbased on the Congressional Review Act, formally disapproves of the SEC’s crypto accounting rule.
According to Mike FloodChairman Gary Gensler’s SAB 121 prevents banks from serving as crypto custodians. These cannot safely safeguard Americans’ hard-earned assets. It therefore presents a risk to consumer protection. Additionally, SAB 121 treats crypto holdings differently from other assets. Which leads to injustice for the holders.
So, the approval of this resolution will remove the legal force of Staff Accounting Bulletin 121.
Has the SEC exceeded its powers over cryptos?
When a federal agency uses its guidance to establish new policies, it can provoke disapproval from Congress. This is why several members of Congress requested clarification on SAB 121 from the Securities and Exchange Commission in November 2023. The Government Accountability Office (GAO) concluded that the regulator should have formally presented this new policy to legislators.
Indeed, the SEC should have heard comments from the public and the authorities concerned before its implementation. Flood thus stressed that Congress should serve as a safeguard against the excesses of a regulator on cryptos.
For the moment, the SEC has not issued any comments on this recent opposition to the bulletin.
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