U. S. Lawmakers Afraid of SEC’s Policy regarding crypto industry
2023.03.03 02:47
U. S. Lawmakers Afraid of SEC’s Policy regarding crypto industry
By Tiffany Smith
Budrigannews.com – The national securities regulator’s crypto accounting guidelines have been criticized by two lawmakers in the United States, who claim that they put crypto customers at greater risk of loss.
The guidelines, which came from the Securities and Exchange Commission of the United States, went into effect in April of last year.
Financial institutions that hold crypto for customers are required by the guidelines to declare all digital assets over which they have no control as liabilities. Additionally, they assert that digital assets ought to be supported by a security asset.
According to SEC’s new rule SAB 121, which was issued in March 2022, crypto companies must show liabilities equal to ALL customer crypto assets. @coinbase complied for their Q2 filing and now shows an $88 billion “customer crypto liabilities” item. https://t.co/59029Pr2LE
On the other hand, Representative Patrick McHenry and Senator Cynthia Lummis argued on March 2 that these guidelines will “likely” discourage regulated entities from engaging in digital asset custody, which is the exact opposite of what the regulator should be doing.
The lawmakers argued in a letter to high-ranking officials from the National Credit Union Administration, the Office of the Comptroller of the Currency, the Federal Reserve System, and the Federal Deposit Insurance Corporation that although Staff Accounting Bulletin (SAB) 121 was meant to clarify how digital assets should be treated in accounting, it had undesirable side effects. They penned:
“SAB 121 violates the SEC’s fundamental mission to protect customers by placing customer assets at a greater risk of loss if a custodian becomes insolvent or enters receivership.”
According to the lawmakers, “denying millions of Americans access to safe and secure custodial arrangements for digital assets” will be the result of SAB 121.
“Summarily, SAB 121 has the effect of denying millions of Americans access to safe and secure custodial arrangements for digital assets,” the statement reads.
Additionally, the lawmakers argued that “a more nuanced hierarchy for this asset class which considers the opportunities and risks of digital assets with different functions is necessary” in opposition to the “breadth of the “digital asset” definition in SAB 121.”
The SEC accounting bulletin has previously been the subject of controversy among lawmakers, including Lummis.
On June 16 of last year, five Republican senators, including Lummis, expressed their concern that the bulletin violated the Administrative Procedure Act and amounted to “regulation disguised as staff guidance.”
On March 31, shortly after the bulletin was released, SEC commissioner Hester Peirce expressed similar concerns, noting that she disagreed with “the way the change is being made” rather than the accounting determination itself. She described the shift as follows:
“Yet another illustration of the scattered and ineffective crypto policy of the Securities and Exchange Commission.”
