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Critics Apprise of the SEC's Cryptocurrency Regulation Strategy, Bipartisan Resolution Progresses
A bipartisan effort in Congress to repeal SAB 121, which regulates cryptocurrencies for the SEC, has been prompted by criticism. This repeal is advocated on the grounds that it would ensure banks' custody of digital assets is secure and investors would be better protected.
Blockworks reports that the regulatory approach of the Securities and Exchange Commission (SEC) regarding cryptocurrencies has garnered criticism during Gary Gensler's tenure as chairman of the SEC. The SEC has faced allegations of exceeding its regulatory jurisdiction and impeding the rational oversight of digital assets over the course of time. An exemplary illustration of this is Staff Accounting Bulletin 121 (SAB 121), which requires the disclosure of digital assets on the balance statements of publicly traded institutions. This undermines the foundational banking principle that custodial assets ought to be maintained off-balance sheet, resulting in the marginalization of banks.
SAB 121, which prohibits banks, which have decades of experience providing custodial services to the traditional financial system, from participating, has been deemed detrimental to the digital asset market. This exclusion is thought to diminish the security of American investors. A concern was brought to light by the recent authorization of bitcoin ETPs: the bitcoin contained within these ETPs is not held by banks, and the majority of them are held by the same custodian. Gensler ought to attend to this issue in order to safeguard the interests of retail investors.
Additionally, the bulletin distribution procedure has been criticized. By issuing a bulletin rather than a rule, the SEC attempted to circumvent the standard regulatory process and issue SAB 121 without consulting banking regulators. The nonpartisan Government Accountability Office ruled that SAB 121 is essentially a rule under the Congressional Review Act due to the controversy surrounding this action.
207 Republicans and 21 Democrats joined in last week's passage of H.J. Res. 109, a bipartisan resolution in the US House of Representatives that seeks to revoke SAB 121. It is now scheduled that the Senate consider H.J. Res. 109. Advocates of the resolution anticipate that it will compel the SEC to reconsider its stance on digital assets and guarantee the secure storage of cryptocurrencies, all in the interest of American investors.
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