The US Congress has released a memo dated November 15, expressing their disapproval of the SEC’s Staff Accounting Bulletin (SAB) 121. This rule, which was published on April 11, 2022, requires financial institutions offering crypto custodial services to keep a specified amount of funds backing their customers’ digital assets.
Pro-crypto Senator Cynthia Lummis, who first brought up the issue in August 2022, is spearheading this legal tussle. She is joined by other members of Congress, including Senator Kirsten Gillibrand and Representatives Patrick McHenry and French Hill.
In the memo, the US Congress argued that SAB 121 did not go through the necessary steps to be legally enforceable. It was never submitted to Congress or the GAO, nor was it published in the Congressional Record, which is the required step consistent with the Congressional Review Act (CRA).
The memo further stated that if the SAB 121 ruling is allowed to stand, it could set a troubling precedent that allows the SEC and other government agencies to gain regulatory authority over institutions not authorized by the US Congress.
The US Congress has asked the FDIC Chairperson and other financial authorities to provide needed clarity and guidance to showcase that the SAB 121 ruling should not be enforceable.
The intense focus of the SEC on the crypto space, coinciding with the tenure of former crypto and blockchain professor Gary Gensler as the head of the government agency, has prompted platforms like Coinbase to explore international expansion. The centralized crypto exchange has since chosen Ireland as its European base, seeking global expansion beyond the domestic scene.