US SEC Faces Pushback on Crypto Regulation SAB 121 from Legislators
In a recent development, the U.S. Securities and Exchange Commission’s (SEC) proposed crypto regulation, Staff Accounting Bulletin 121 (SAB 121), is encountering opposition from American lawmakers. The rule which demands that financial institutions offering cryptocurrency custodial services maintain a particular amount of funds backing their customer holdings has sparked controversy within the Congress.
Fury Over Enactment Without Congressional Oversight
Several members of the U.S. Congress have expressed their discontent over the SAB 121 directive in a written memorandum to key financial authorities. They assert that the ruling should hold no legal effect on financial institutions and there is no obligation for these institutions to recognize liability and asset offsets on their balance sheets.
Notably, the grievance of the senators includes concerns that the SAB 121 mandate, having not been submitted to Congress or the Government Accountability Office (GAO), flouts the Congressional Review Act (CRA). They contend that it wasn’t published in the Congressional Record, which the CRA compels.
Fears of Potential Regulatory Gamesmanship
The objections raised by the senators extend beyond mere procedural issues. The lawmakers are wary that the acquiescence to the SAB 121 rule could set a precedent for potential regulatory gamesmanship. They worry that it might inadvertently empower agencies not sanctioned by Congress itself.
Widespread Bipartisan Disapproval
The discontent surrounding the SAB 121 ruling cuts across party lines. Democratic Senator Kirsten Gillibrand and Republican Representatives Patrick McHenry and French Hill, among others, have voiced apprehensions over the legality of SAB 121. The discontent reflects a growing bipartisan consensus that the SEC needs to tread cautiously in its handling of cryptocurrency regulation.
The SEC’s Increasing Crypto Oversight
The SEC, under the leadership of former crypto and blockchain professor Gary Gensler, has amplified its efforts to regulate the burgeoning crypto sector. The increasing oversight, however, seems to be causing friction with lawmakers who fear an overreach of authority.
Lawmakers’ Call for Clarity
With all eyes on the United States’ financial regulatory landscape, Congress is urging clarity on the SAB 121 ruling. They seek comprehensive, public guidelines demonstrating that the rule should be deemed unenforceable. Without clear guidance, the future of regulation and institutional adoption in the U.S crypto space hang in the balance.
Meanwhile, Companies Look Elsewhere
Throughout the regulatory controversies, digital currency companies continue to spread their operations beyond U.S. shores. Coinbase, for example, has charted a course for Ireland as its European base. The move displays how regulatory uncertainties at home could catalyze an exodus to more crypto-friendly regulatory environments.
As the dialogue continues, the crypto world waits to see if the SEC will reply to the legislators’ pushback or whether Congress will actively intervene.