Congress Challenges SEC's Crypto Asset Regulation

Congress Seeks to Overturn SEC Crypto Rule

U.S. lawmakers are making moves to rescind a Securities and Exchange Commission (SEC) accounting bulletin which poses constraints on entities holding customer crypto assets. Leading the charge are Sen. Cynthia Lummis and Reps. Wiley Nickel and Mike Flood, who have introduced resolutions in both legislative houses to contest the SEC's controversial guideline, known as SAB 121, and declare it legally ineffective.

Controversy Over SEC's Approach

Introduced in 2022, SAB 121 requires that companies holding clients' cryptocurrencies reflect this on their balance sheets—an expectation that could burden banks interested in crypto custody with excessive capital to cover potential risks. This has sparked major debate within the crypto community, which views the SEC's decision as overreach. According to the Government Accountability Office, the SEC circumvented the usual legislative process, prompting Congress's current action.

Industry Backing

The move to nullify SAB 121 has garnered support from crypto lobbying groups, who criticize the SEC for not consulting with financial institutions nor conducting the standard public input process prior to issuing the bulletin. These measures aim to check regulatory overreach and encourage institutions to provide digital asset custody services without onerous financial requirements.