Senator Cynthia Lummis, McHenry Push US SEC To Revoke SAB 121

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As a seasoned analyst with years of experience navigating the complexities of financial regulations, I find the pushback against Staff Accounting Bulletin 121 (SAB 121) by Senator Cynthia Lummis, House Financial Services Committee Chairman Patrick McHenry, and their bipartisan allies quite intriguing. My personal take is that this rule, if implemented as intended, could potentially stifle the growth of the crypto industry in the United States.

Senators Cynthia Lummis and Patrick McHenry, in their capacity, are urging the U.S. Securities and Exchange Commission (SEC) to revoke Staff Accounting Bulletin 121 (SAB 121). In simpler terms, they’re asking the SEC to withdraw its decision made in SAB 121.

In a correspondence addressed to the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, they expressed their concerns regarding a specific rule and its detrimental effects on the crypto sector. They urged for the removal of this rule prior to the upcoming SEC oversight hearings.

Senator Cynthia Lummis, McHenry Pushback on SAB 121

According to a letter from Cynthia Lummis, McHenry, and a bipartisan group of lawmakers, SAB 121 imposes undue burdens on crypto custodians by requiring them to list customer assets as liabilities on their balance sheets. In the letter, 13 senators and 29 House representatives signed up for the petition to have SAB 121 nullified. 

It’s argued that this accounting rule exaggerates the actual legal responsibilities of the custodians, potentially placing consumers in a riskier position.

The letter pointed out that SAB 121 was enacted without proper consultation with the appropriate regulatory bodies and without adhering to the notice-and-comment process stipulated by the Administrative Procedure Act (APA). A Government Accountability Office (GAO) assessment classified SAB 121 as a formal rule, and there were significant debates about how the Securities and Exchange Commission applied it as staff guidance.

Ritchie Torres Criticizes SEC 

Congressman Ritchie Torres expressed firm disapproval towards SAB 121, alleging that the Securities and Exchange Commission has misapplied the rule. He specifically criticized the agency for enforcing SAB 121 in a manner inconsistent with standard accounting principles (GAAP).

Consequently, the letter expresses the shared opinions from both the House and Senate, who had previously passed resolutions with similar content, opposing the Staff Accounting Bulletin 121 Bill. Critics of SAB 121 suggest that it restricts financial innovation and imposes unnecessary regulations on custodians, potentially hindering the growth of cryptocurrencies in the United States.

Lawmakers additionally emphasized that the Securities and Exchange Commission (SEC) holds the authority to rescind the bulletin, and they urged Gensler to work closely with Congress to implement updated regulations for the digital asset industry. These new rules should foster growth in the sector without impeding it, all while maintaining consumer safety.

Closed-Door Exemptions Raises Doubts

The letter also had other issues with the Securities and Exchange Commission’s use of SAB 121. Lawmakers also accused the SEC’s Office of Chief Accountant of conducting behind-the-scenes meetings with specific industry players and providing them with permission to ignore the balance sheet disclosure provisions of the bulletin. This selective process, as stated in the letter, has led to ambiguity and unequal application of SAB 121 thus eroding its credibility.

1) The actions taken by lawmakers reflect an enhanced attention towards the Securities and Exchange Commission’s stand on cryptocurrencies. Additionally, Coinbase has found itself embroiled in a series of legal disputes with the SEC regarding the categorization of digital assets.

Following this, the demand for repealing Staff Accounting Bulletin 121 has been raised, just before U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before Congress on September 24 and 25. During these hearings, Gensler is anticipated to field tough queries from lawmakers regarding the SEC’s actions in regulating digital assets. The discussions are expected to encompass not only SAB 121 but also wider issues concerning the SEC’s approach to cryptocurrency regulation.

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2024-09-24 03:46