Exclusive: GOP Congressional members urge SEC to rescind crypto rule
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Republican members of Congress from both chambers urged the Securities and Exchange Commission in a letter today to rescind its special rule for accounting for cryptocurrency assets.
Why it matters: The one and only issue so far to unite Congress enough to pass a piece of crypto-related legislation through both chambers has been the rule in question, known as SAB 121.
- The White House vetoed it in May.
What they're saying: "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 states.
- The lead signatories are House Financial Services Chair Rep. Patrick McHenry and Sen. Cynthia Lummis (R.—Wyo.), who has been working with Sen. Kirsten Gillibrand (D.—N.Y.) to pass comprehensive cryptocurrency legislation.
- A total of 13 senators and 29 members of the House signed the letter; most are either on the House Financial Services committee or Senate Banking.
Friction point: In testimony submitted to the House subcommittee on digital assets last week, the Cato Institute's Jennifer Schulp explained how the rule stands out from similar rules in other corners of the financial industry.
- "SAB 121 upended generally accepted practices by calling on asset custodians to treat clients' digital assets as liabilities on custodians' own balance sheets. Reversing the standard practice of treating custody assets as off-balance sheet increases costs for any entity seeking to provide custody for digital assets."
- Better Markets, an advocacy group, has argued that the rule is justified to shield the banking system from the unique risks of blockchain assets.
Zoom in: In particular, legislators objected to statements made by the agency's chief accountant earlier this month, where he said that his agency has since acknowledged instances when a company's "arrangement was not within the scope of SAB 121," and was therefore exempted from the extra capital obligations presented by the rule.
- The letter's signatories contend that these opaque consultations "only caused further confusion."
Flashback: When he vetoed the legislation that overturned the rule, President Biden wrote: "My Administration is eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities."
