US SEC Misusing SAB 121 To Attack Crypto Custody Providers, Says Congressman

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As a seasoned crypto investor who has weathered numerous market cycles and regulatory storms, I find myself deeply concerned about the recent actions of the US SEC regarding SAB 121. Having closely followed the evolution of blockchain technology and the crypto ecosystem, I’ve seen firsthand how such high-handed regulations can stifle innovation and growth.

In simpler terms, the U.S. Securities and Exchange Commission (SEC) is using a contentious accounting regulation called SAB 121, which makes banks list their digital assets in custody on their financial statements. However, Congressman Ritchie Torres argues that the SEC is going against the principles of proper accounting by keeping this SAB 121 rule in place.

Is the US SEC Misuing SAB 121?

Presented by the Securities and Exchange Commission in March 2022, the SAB 121 Bill is more commonly known as Staff Accounting Bulletin 121 Bill. It has been active for close to two years now, and has sparked debate within the crypto industry due to its contentious nature. Under SAB121, crypto companies are mandated to document their customers’ cryptocurrency holdings on their balance sheet as liabilities.

The U.S. Securities and Exchange Commission (SEC) is requiring all banks to list their cryptocurrency holdings on their financial statements, which could expose them to increased regulatory oversight. Congressman Ritchie Torres has expressed strong opposition to the SEC’s SAB 121 policy, arguing that it conflicts with standard accounting practices widely recognized and accepted (GAAP).

Moreover, Torres additionally criticized the U.S. Securities and Exchange Commission (SEC) for hindering advancement by deterring businesses from exploring blockchain technology. “It’s fundamentally un-American to suppress innovation,” Torres stated.

As a crypto investor, I’ve noticed that there’s a regulatory rule, often referred to as SAB 121, enforced by the SEC. This policy forces banks to list custodial assets directly on their own financial statements, which goes against common accounting practices.

The SEC is effectively ordering companies not to experiment with blockchain technology. There is…

— Rep. Ritchie Torres (@RepRitchie) September 20, 2024

Multiple financial markets are criticizing U.S. regulators for their strict and heavy-handed approach towards cryptocurrency regulations, particularly in regards to banks that maintain favorable ties with crypto companies. A notable example is the bankruptcy of Silvergate Bank, which some claim was pressured by entities like the Fed, FDIC, and others as part of a modernized version of Operation Choke Point 2.0.

The Federal Reserve’s instruction to drastically reduce cryptocurrency-linked transactions, making them account for less than 15% of their operations, played a significant role in causing the company’s downfall.

Banking Players Opting for Crypto Custody

Lately, the U.S. Securities and Exchange Commission (SEC) and the Federal Reserve have been issuing halt orders to multiple banks offering cryptocurrency custody services. Most recently, the Federal Reserve has focused on United Texas Bank, granting them a 90-day window to align with Anti-Money Laundering (AML) regulations. This action by regulators has sparked debate among analysts about why these federally supervised banks are being scrutinized as they move control over crypto custody services into the hands of a select few.

Despite not being stopped, large companies are still making their way into the market. On a recent Friday, financial titan BNY Mellon received approval to provide cryptocurrency custody services, successfully navigating the SAB 121 obstacles. Reportedly, they have been granted an exception from the rules. This development might lead to further involvement of more companies in the coming days or weeks.

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2024-09-21 08:20