US Senators In Tandem With The Disapproval Of Camouflaged Regulation In SEC Staff Accounting Bulletin

Bill Hagerty, a United States Senator has sent a letter, which four other Republican Senators also signed, to the Securities and Exchange Commission (SEC) chair Gary Gensler and implused the withdrawal of a staff accounting bulletin, addressed as SAB 121. It was issued by the agency recently.

The senators highlight that the bulletin amounts to regulation disguised as staff guidance and does not adhere to the Administrative Procedure Act.

The accounting bulletin SAB 121 puts forward guidance on accounting and disclosure for entities that safeguard the crypto assets of clients and facilitate them to perform transactions with them.

According to the bulletin, those companies that comprise platforms like Robinhood and Coinbase should list virtual assets as liabilities on their balance sheets at fair value. The requirement for the new accounting procedure was attributed to increased risks from crypto-assets.

The letter by the senators noted that SEC staff enable guidance on current regulations but no regulations are opined in SAB 121, and the bulletin was worded as though compliance was an exception, despite the fact that a staff bulletin is not intended to make enforceable obligations. The letter further criticizes SEC policy highlighting that the commission’s approach to the emerging crypto space has not promoted process, public engagement, or transparency.

Additionally, the letter was signed by Senators Cynthia Lummis. Thom Tillis, M. Michael Rounds, and Mike Crapo. SAB 121 drew out an instant unfavorable response from Hester Peirce, SEC Commissioner who also criticized the way the change is being carried out.

Last month, the crypto exchange Coinbase caught a bit of limelight when it included a statement citing, in the instance of bankruptcy, the digital assets they hold on behalf of their customers may be subjected to bankruptcy proceedings.

Later on, the CEO Brian Armstrong highlighted that the statement was included because of an SEC need called SAB 121 which is a newly needed disclosure, and that his company is in no danger of bankruptcy.

And the banking space also approached the bulletin with alarm. The Securities Industry and Financial Markets Association (SIFMA) and American Bankers Association also sent a letter to SEC late last month stating that their member firms think there are a bunch of questions related to the scope and application of SAB 121 and hence, deferral of the effective date is important to make sure these things are properly addressed.

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