The set of rules called “Employee Accounting Bulletin No 121”, which SEC employees wrote in March 2022 and published it on March 31 of that year, was not accepted by the Financial Services Committee of the House of Representatives. In a vote yesterday, the Committee voted 31 to 20 in favor of the complete revocation of this bulletin.
In order to be formally adopted, the repeal proposal must first be put to a vote in the House of Representatives, to which the committee belongs, and if it is accepted there, it will be sent to the Senate for a new vote. If the Senate agrees, the repeal will then become official.
Why there is a backlash to the bulletin?
The set of rules, also known as “SAB 121” for short, states that organizations that store and hold cryptocurrencies should show these assets on their balance sheets. Experts say that this will seriously affect the financial statements and requirements of companies.
In addition to cryptocurrency companies, banks that are now considering providing crypto custody services in the US are also strongly opposed to this bulletin.
SAB 121 also states that organizations should clearly explain the risks of storing and receiving crypto to users and customers.
There was pressure to cancel and revise
It is worth noting that, SAB 121 is actually a recommendatory bulletin. In other words, it is not an important set of official rules to be implemented. Analysts state that this bulletin is only the opinion of those working in the relevant department of the SEC and does not represent regulations.
The crypto world opposes this bulletin, which may become law in the future, because it imposes heavy burdens on companies. There has been pressure on the SEC to withdraw this bulletin or revise it widely for about two years.
Bitcoin could affect the price of spot ETFs
Mike Flood, the member of the House of Representatives who introduced the motion, said that custody assets, including securities for banks, have always been considered “off-balance sheet” items.
The two page motion, introduced by Flood and coungressman Wiley Nickel, aims to repeal the bulletin altogether.
Flood also said SAB 121 could also affect spot bitcoin exchange-traded funds, which were approved by the SEC in January. Flood said that banks cannot be custodians for these ETFs because of SAB 121.
Republicans and Democrats are at odds on this issue as well
Republican Congressman Flood’s statements were opposed by Maxine Waters, one of the best-known names on the Democratic side, and claimed that the bulletin actually reflected the demands of the crypto world, which has long been seeking transparency.
“The crypto industry has long complained about the lack of clarity from the SEC when it comes to crypto and how the SEC supposedly only regulates crypto through enforcement rather than through regulation,” she said on Tuesday. “Notably this guidance was offered to protect investors against the mishandling of customer crypto assets by custodians — a practice that was at the core of FTX’s spectacular collapse when billions of crypto assets went missing.”
Secret Service bill also approved
On the other hand, the Committee also approved a bill yesterday that expands the powers of the US secret services to combat money laundering through cryptocurrencies.