Home Crypto Exchanges Congress Members Push for Clarification on Crypto Custody Rules Amid SEC Controversy

Congress Members Push for Clarification on Crypto Custody Rules Amid SEC Controversy

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In a bid to address the ongoing controversy surrounding the SEC’s Staff Accounting Bulletin 121 (SAB 121) and its implications for crypto custody regulations, several Congress members have taken a stand, calling for clearer guidelines. The push comes amidst concerns regarding the rule’s impact on banks offering custody services for digital assets.

The memo, submitted by a group of bipartisan Congress members, including Patrick McHenry, Cynthia M. Lummis, French Hill, Kirsten Gillibrand, Ritchie Torres, Mike Flood, and Wiley Nickel, urges key financial authorities to offer guidance or take action to clarify the enforceability of SAB 121. They argue that the recent determination by the Government Accountability Office (GAO) raises questions about the rule’s legality and its alignment with established regulations.

SAB 121, as it stands, requires banks and financial institutions to reflect the value of customers’ crypto assets on their balance sheets, mandating the maintenance of capital against these assets. This provision has triggered industry concerns and criticism from Republican lawmakers who believe it creates a disparity in treatment between crypto holdings and other traditional assets. Critics argue that this rule could discourage regulated banks from providing crypto custody services.

The GAO’s determination, prompted by a letter from Senator Lummis to the U.S. Comptroller General, highlighted the need for congressional review of SAB 121 under the Congressional Review Act (CRA). Under this act, any agency rule must undergo scrutiny by the comptroller general and both chambers of Congress, providing a mechanism for possible disapproval.

The recent catalyst for action was the Government Accountability Office’s (GAO) determination following a letter from key figure Cynthia M. Lummis to the U.S. Comptroller General. The GAO’s assessment prompted a closer examination of whether SAB 121 qualifies as a rule under the Congressional Review Act (CRA), a process enabling Congress to disapprove of agency rules.

The memo submitted by a cohort of congressional members, including Patrick McHenry, Cynthia M. Lummis, French Hill, Kirsten Gillibrand, Ritchie Torres, Mike Flood, and Wiley Nickel, emphasizes that SAB 121, in their view, should hold no legal weight. They argue against the imposition of this rule on financial institutions providing custody services for digital assets, asserting that it conflicts with existing regulations.

Expressing their apprehensions through the memo, the Congress members emphasized the importance of not enforcing a rule that contradicts existing regulations, fearing the establishment of a concerning precedent. They cautioned against allowing regulatory maneuvers to circumvent the Administrative Procedure Act (APA), potentially granting the SEC regulatory authority over institutions without Congress’s authorization.

This recent move by Congress members aligns with earlier actions taken by Republican senators, including Lummis, who voiced their discontent with what they referred to as “backdoor regulation” in the SEC’s bulletin. Additionally, Representative Mike Flood confronted SEC Chair Gary Gensler regarding the bulletin’s implications during a House Financial Services Committee meeting, emphasizing the need for clarity and regulatory consistency.

In summary, the call for clarification on crypto custody rules reflects the growing concern among policymakers regarding the implications of SAB 121. The debate continues to raise questions about regulatory oversight, compliance, and the need for a balanced approach to accommodate the evolving landscape of digital assets within the financial sector.

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Sakamoto Nashi

Nashi Sakamoto, a dedicated crypto journalist from the Virgin Islands, brings expert analysis and insight into the ever-evolving world of cryptocurrencies and blockchain technology. Appreciate the work? Send a tip to: 0x4C6D67705aF449f0C0102D4C7C693ad4A64926e9

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