The US Securities and Exchange Commission (SEC) is facing criticism from Democratic lawmaker Rep. Wiley Nickel of North Carolina regarding the agency’s management of a controversial bulletin related to the accounting of companies’ cryptocurrency holdings. This report from The Block highlights Rep. Nickel’s concerns about the potential impacts of the bulletin, which he believes could undermine the security of digital assets.
Concerns over Safety of Digital Assets
In a recent House Financial Services subcommittee hearing, Rep. Wiley Nickel expressed his concerns about the bulletin’s implications and emphasized the importance of Congress having a say in this matter. He also questioned whether the SEC’s actions were in compliance with the Administrative Procedures Act (APA), which regulates how federal agencies establish and issue rules.
The bulletin in question is the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), published in March 2022. It requires companies holding cryptocurrency on behalf of customers to record those holdings as liabilities on their balance sheets. However, the Government Accountability Office (GAO) has highlighted that the SEC should present the bulletin to Congress for evaluation before it can take effect. This clarification from the GAO is based on the requirements of the Congressional Review Act.
Critical Reactions from Congress
Several other members of Congress have also voiced criticism of the bulletin. Rep. Patrick T. McHenry, a Republican from North Carolina and the Chair of the House Financial Services Committee, believes the bulletin imposes significant new requirements on financial institutions, which could discourage them from offering custodial services.
Furthermore, Sen. Cynthia Lummis, a Republican from Wyoming and a prominent pro-crypto member of Congress, intends to use the Congressional Review Act to block the rule. She argues that the bulletin should have been presented as an official rule instead of a bulletin.
“The controversial bulletin issued by the SEC regarding the accounting of companies’ crypto holdings has raised concerns about the safety of digital assets. Congress should have a say in evaluating such rules, and the SEC’s compliance with the Administrative Procedures Act should be scrutinized.”
– Rep. Wiley Nickel
“The SEC’s bulletin imposes onerous requirements on financial institutions, potentially discouraging them from providing custodial services. This could hinder the development of the cryptocurrency industry.”
– Rep. Patrick T. McHenry
“The SEC should have presented this rule in a more formal manner for proper evaluation. I will use the Congressional Review Act to oppose its implementation.”
– Sen. Cynthia Lummis
