SAB 121 under fire: Bipartisan push to rescind controversial bulletin

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  • Lawmakers urge SEC to rescind SAB 121 over concerns about consumer protection and innovation.
  • SEC Chair Gensler faces scrutiny during Congress testimony regarding cryptocurrency regulation and enforcement.

As a seasoned crypto investor with years of experience navigating the volatile digital asset landscape, I find myself closely watching the ongoing debate surrounding Staff Accounting Bulletin 121 (SAB 121) and its potential impact on the industry. The recent push by lawmakers to rescind SAB 121, particularly Senator Cynthia Lummis and House Financial Services Committee Chairman Patrick McHenry, has caught my attention.

In June, President Joe Biden utilized his veto authority to prevent the overturning of Staff Accounting Bulletin 121 (SAB 121). However, discussions about this particular rule continue to be intense.

By July, the bill resurfaced on Capitol Hill as legislators aimed to accumulate sufficient backing to bypass a veto with an overriding majority.

Republicans urge SEC to withdraw SAB 121

In the midst of these advancements, Senator Cynthia Lummis, together with House Financial Services Committee Chair Patrick McHenry, appealed to the United States Securities and Exchange Commission (SEC) to reconsider and rescind SEC Rule 121.

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On September 23rd, a group of 41 legislators, including Lummis and McHenry, penned a letter expressing their concerns about the bulletin. They believe that it weakens regulations governing cryptocurrency custody, erodes consumer safeguards, and stifles financial advancement.

They contended that SAB 121 was implemented without engaging any prudential regulators.

As a crypto investor, I understand that according to this rule, my digital asset custodian is required to recognize a corresponding liability on their books, valuing it based on the fair market worth of my digital assets they are safeguarding for me.

The lawmakers added, 

Using an alternative method in accounting that strays from conventional standards might not correctly portray the actual legal and financial duties of the custodian, potentially exposing consumers to a higher chance of financial loss.

What’s the reason behind this move?

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The letter emphasized that the authors considered SAB 121 was implemented without adequate consultation with relevant regulators and without following the notice and comment process required by the Administrative Procedure Act (APA).

The Government Accountability Office (GAO) scrutinized SAB 121 and deemed it an official regulation, leading to intense discussions regarding the Securities and Exchange Commission’s (SEC) choice to apply it as internal advice.

Reinforcing their argument the lawmakers noted, 

“Rescinding SAB 121 is the only appropriate action and well within the SEC’s authority.”

Execs weighing in…

In a letter dated May 15th, Democrat representative Wiley Nickel asserted that the regulator has strayed from its purpose of safeguarding investors by attempting to implement the contentious SAB 121, which he believes oversteps the regulator’s authority.

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Adding to the fray was Congressman Ritchie Torres who said, 

What lies ahead for Gensler and SAB 121?

It’s worth noting that the effort to abolish Staff Accounting Bulletin 121 aligns with Gensler’s scheduled testimony before Congress, which is set for the 24th and 25th of September.

Legislators intend to ask probing questions about the agency’s approaches for enforcing regulations within the digital assets sector.

The hearings will delve into more than just the effects of SAB 121; they will also explore wider aspects concerning the Securities and Exchange Commission’s strategy for overseeing cryptocurrencies, underscoring the increasing examination of their regulatory measures.

In 41 days, the election results will greatly influence who leads regulatory bodies. If Donald Trump wins, he’s suggested that he might dismiss Gary Gensler from his position.

Conversely, should Kamala Harris win, Gensler might find himself nominated as Treasury Secretary.

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2024-09-24 15:04