As the U.S. Securities and Exchange Commission (SEC) Chair keeps chasing non-compliance in crypto, his agency was slammed by the watchdog Government Accountability Office (GAO) for its own compliance failure in issuing crypto accounting standards without treating the policy as a formal rule.
So, what now? In practical terms, probably nothing much.
The agency is likely to rectify the accusation that it sidestepped the Congressional Review Act (CRA) by submitting Staff Accounting Bulletin 121 (SAB 121) to Congress, as the GAO argued should have been done when the controversial policy was issued in 2022.
Under the review act, Congress is meant to get a chance to overturn new federal rules before their ink dries. But the current Senate and House of Representatives are split between political parties, and the closely divided Congress is unlikely to agree on what to do with SAB 121, despite the goals of some Republicans.
“This sets an incredibly dangerous precedent,” said U.S. Sen. Cynthia Lummis (R-Wyo.), the lawmaker who originally requested the GAO review. “I plan to use the Congressional Review Act to block this rule in the coming weeks.”
The accounting bulletin basically instructed financial institutions that when they take in customers’ crypto assets, they should factor those assets into their own balance sheets – effectively telling banks to maintain expensive capital reserves against their customers’ digital assets.
“Ultimately, this would deter institutions and firms from offering custodial services – denying Americans access to safe and secure custody of their assets,” said Rep. Patrick McHenry (R-N.C.), the chairman of the House Financial Services Committee that oversees the SEC. “SAB 121 was drafted with zero input from prudential regulators and the public, and now Congress must step in to block this harmful rule.”
If the SEC sends SAB 121 as a “rule” to Congress under the CRA, both chambers have about two months to pass a resolution repealing it.
Meanwhile, the SEC isn’t showing signs of budging on the bulletin.
“The GAO opinion expresses its view that SAB 121 is a ‘rule’ for purposes of the CRA,” the…