US senator Bill Hagerty has sent a letter, signed by four other Republican senators, to the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, in which he urges the withdrawal of a staff accounting bulletin, called SAB 121, published by the agency on March 31. According to the senators, the bulletin amounts to “regulation disguised as staff orientation” and does not comply with the Administrative Procedure Law.
SAB 121 provides accounting and disclosure guidance for companies that safeguard customers’ crypto assets and allow them to transact with them. The bulletin says that those companies, which include platforms like Coinbase and Robinhood, must list digital assets as liabilities on their balance sheets at fair value. The need for the new accounting procedure was attributed to the “increased risks” of crypto assets.
The senators’ letter noted that the SEC staff provides guidance on existing regulations, but no regulation is cited in SAB 121, and the bulletin was written as if compliance is an expectation, even though a staff bulletin is not intended to create enforceable obligations. The letter goes on to criticize SEC policy in general:
“The SEC’s approach to the emerging cryptocurrency market has not promoted due process, transparency, or public participation.”
In addition to Haggerty, the letter was signed by Senators Cynthia Lummis, M. Michael Rounds, Thom Tillis and Mike Crapo. SAB 121 elicited an immediate unfavorable response from SEC Commissioner Hester Peirce, who also criticized “the way the change is being made”.
Coinbase caused a momentary stir in May when it included a statement that “in the event of bankruptcy, crypto assets we hold on behalf of our customers may be subject to bankruptcy proceedings.” in its first quarter report to the SEC. Brian Armstrong, CEO of the exchange, took to Twitter to explain that the statement was included due to “an SEC requirement called SAB 121, which is a newly required disclosure,” and that the company was not in danger of bankruptcy.
2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties. https://t.co/lwmgb1kFtA
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
We do not have any risk of bankruptcy, however, we include a new risk factor based on an SEC requirement called SAB 121, which is a new information required for public companies that hold crypto assets for third parties
The banking sector also reacted to the bulletin with alarm. The American Bankers Association and the Securities Industry and Financial Markets Association SIFMA sent a letter to the SEC on May 27 saying: “Our member firms believe that there are a number of questions regarding the scope and application of SAB 121 and therefore believe that the postponement of the effective date is necessary to ensure that these issues are adequately addressed.”
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.