U.S. lawmakers argue SEC accounting policy places crypto customers at risk

Two United States lawmakers person criticized crypto accounting guidelines outlined by the securities regulator, arguing it places crypto customers astatine greater hazard of loss.

The guidelines came from the United States Securities and Exchange Commission (SEC), which became effectual successful April past year.

The guidelines inquire fiscal companies holding crypto for customers to admit each integer assets they bash not power arsenic a liability. It besides states that integer assets should beryllium backed by a safeguarding asset.

Crypto companies indispensable amusement liabilities adjacent to ALL lawsuit crypto assets, according to SEC's caller regularisation SAB 121 issued successful March 2022.@coinbase complied for their Q2 filing and present shows an $88B "customer crypto liabilities" item. https://t.co/59029Pr2LE

— Cory Swan.com #Bitcoin WORKS (@coryklippsten) August 15, 2022

However, Senator Cynthia Lummis and Representative Patrick McHenry argued connected Mar. 2 that these guidelines volition “likely” discourage regulated entities from engaging successful integer plus custody, which is the other effect of what the regulator should beryllium doing. 

In a letter to ranking individuals from the Federal Reserve System, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation  (FDIC) and the National Credit Union Administration, the lawmakers argued that portion Staff Accounting Bulletin (SAB) 121 was intended to supply clarity connected accounting attraction for integer assets, it carried antagonistic broadside effects, claiming:

“SAB 121 places lawsuit assets astatine greater hazard of nonaccomplishment if a custodian becomes insolvent oregon enters receivership, violating the SEC’s cardinal ngo to support customers.”

The lawmakers reason the effect of SAB 121 volition beryllium to “deny millions of Americans entree to harmless and unafraid custodial arrangements for integer assets.”

— Senator Cynthia Lummis (@SenLummis) March 2, 2023

The lawmakers besides disagreed with the “breadth of the ‘digital asset’ explanation successful SAB 121,” arguing that “a much nuanced hierarchy for this plus people which considers the opportunities and risks of integer assets with antithetic functions is necessary.”

Related: SEC seat implies crypto exchanges whitethorn not beryllium ‘qualified custodians’ arsenic caller regularisation is drafted

Lawmakers including Lummis person kicked up a fuss implicit the SEC accounting bulletin successful the past.

Last year, 5 Republican Senators, including Lummis, sent a letter to the SEC connected Jun. 16, sharing their interest that the bulletin amounted to “regulation disguised arsenic unit guidance” and did not adhere to the Administrative Procedure Act.

SEC commissioner Hester Peirce shared akin concerns connected Mar. 31, soon aft the bulletin was released, noting it was “the mode the alteration is being made” alternatively than the accounting determination itself she took contented with, which she characterized as:

“Yet different manifestation of the Securities and Exchange Commission’s scattershot and inefficient attack to crypto.”