Republican lawmakers from both the Senate and House have called on the Securities and Exchange Commission (SEC) to retract a controversial accounting rule for cryptocurrency assets.
What Happened: The rule, known as SAB 121, has become a point of contention in the ongoing regulatory debate around digital assets.
This move comes as the crypto industry continues to grapple with regulatory uncertainty, and industry experts, including Custodia Bank CEO Caitlin Long, who is scheduled to speak at Benzinga’s Future of Digital Assets conference on Nov. 19, are speaking out about the need for clearer, more balanced frameworks.
Long has consistently emphasized that regulation should encourage the growth of the crypto industry without unnecessary overreach. At previous Benzinga events, Long stressed the importance of allowing blockchain technology to thrive in the U.S. while implementing safeguards to protect against market abuses.
Why It Matters: SAB 121 is one of the rare issues in the cryptocurrency space that has united both chambers of Congress.
It is the only crypto-related legislation to pass through the House and Senate, although it was vetoed by the White House in May.
What Lawmakers Are Saying: In a letter addressed to the SEC, Republican members of Congress criticized the agency for what they consider an overreach in implementing the rule, Axios reported.
“Both the House and Senate vote on H.J. Res. 109 sent a clear message from Congress to the SEC. Issuing staff guidance to impose policy changes is not appropriate and violates both the spirit and the letter of the Administrative Procedure Act. We urge you to rescind SAB 121,” the letter reads.
The letter was spearheaded by Rep. Patrick McHenry (R-N.C.), Chair of the House Financial Services Committee, and Sen. Cynthia Lummis (R-Wyo.), who has been actively working with Sen. Kirsten Gillibrand (D-N.Y.) on broader cryptocurrency legislation.
The letter was signed by 13 senators and 29 House members, primarily those involved in financial services and banking committees.
The Core Issue: One of the main points of contention is how SAB 121 disrupts conventional accounting practices.
Jennifer Schulp of the Cato Institute, in recent testimony before the House Subcommittee on Digital Assets, emphasized that “SAB 121 upended generally accepted practices by calling on asset custodians to treat clients’ digital assets as liabilities on custodians’ own balance sheets.”
She pointed out that this reversal of standard practices leads to increased costs for companies providing custody services for digital assets.
On the other hand, advocacy group Better Markets supports the rule, arguing that it is necessary to protect the financial system from the unique risks posed by blockchain and digital assets.
Caitlin Long called the developments “not fair,” saying, “The progressives are actually big-bank corporatists.” She is expected to further expand on this view at Benzinga's Future of Digital Assets event on Nov. 19, where she will discuss the impact of regulations like SAB 121 on both institutional trust and market dynamics.
Regulatory Confusion: Legislators also expressed concerns over the SEC's recent statements, particularly from its chief accountant, suggesting that some companies may be exempt from the rule depending on their specific arrangements.
The lawmakers argue that these exemptions have not been communicated clearly, adding to the confusion around the rule. “These opaque consultations only caused further confusion,” the letter's signatories wrote.
Looking Back: President Joe Biden vetoed legislation aimed at overturning SAB 121 in May.
In his veto statement, Biden expressed a willingness to collaborate with Congress on creating a more balanced regulatory framework for digital assets, noting, “My Administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities.”
As the debate over cryptocurrency regulation continues, industry experts and lawmakers are preparing for Benzinga's Future of Digital Assets event on Nov. 19.
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