Members of the US Congress, primarily from the Republican party, have taken action to promote a more favorable regulatory atmosphere for Bitcoin (BTC) and cryptocurrency custodians.
A group of pro-crypto lawmakers, including House Financial Services Chair Patrick McHenry and Senator Cynthia Lummis, sent a letter to Gary Gensler, chair of the US Securities and Exchange Commission (SEC), requesting the withdrawal of an accounting guideline for digital assets known as Staff Accounting Bulletin 121 (SAB 121).
Concerns Raised Over SEC’s SAB 121
The letter released on Monday and signed by an additional forty-two lawmakers underscores a strong bipartisan call from Congress against SAB 121, particularly highlighted in the recent passage of H.J.Res.109.
This resolution requests that the SEC reevaluate its position on the bulletin, which mandates custodians to report liabilities and offset them on their balance sheets at the fair market value of the clients’ digital assets.
The lawmakers argue that this requirement strays from standard accounting practices and does not accurately depict custodians’ legal and financial responsibilities, which could endanger consumers.
A key criticism of SAB 121 is that it was introduced without sufficient consultation with relevant regulatory bodies, resulting in “confusion and inconsistencies” among financial entities regarding its application.
Additionally, lawmakers claim that the SEC has bypassed essential notice and comment procedures as outlined in the Administrative Procedure Act (APA) by introducing this rule as staff guidance.
They further argue that the SEC’s Office of Chief Accountant (OCA) has worsened the matter by selectively working with certain institutions to sidestep balance sheet reporting requirements, thus undermining the transparency the SEC purports to uphold.
BNY Mellon’s Custodianship: A Potential Change in Direction?
The release of this letter comes just days after the SEC approved BNY Mellon as the first bank exempt from SAB 121.
This approval may pave the way for other financial institutions to pursue similar exemptions, hinting at a possible shift in the SEC’s stance towards traditional banks entering the crypto sector.
Michael Novogratz, CEO of Galaxy Digital, suggested that if the regulatory environment becomes more accommodating, this decision could motivate more banks to get involved with digital assets.
Nevertheless, the pro-crypto lawmakers are urging the SEC to work alongside Congress to ensure that Americans can access secure custodial options for Bitcoin and other cryptocurrencies.
By retracting SAB 121, they believe the SEC would align itself with accepted accounting methods and cultivate a more favorable setting for traditional financial institutions in the evolving cryptocurrency arena.
At the time of this report, Bitcoin was trading at $63,240, remaining stable between this price and the $62,000 level over the past few days.
Featured image from DALL-E, chart from TradingView.com
