Congress Members Urge Financial Authorities to Clarify SEC’s Enforceability

US Congress Calls on Financial Authorities to Invalidate SEC's SAB 121

US Congress members want financial authorities to cancel SEC’s SAB 121.

Several members of the United States Congress have teamed up to deliver a memo that reads like a rap battle, urging key financial authorities to take action or provide guidance on the U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin 121 (SAB 121). Why the fuss, you ask? Well, a recent finding by the Government Accountability Office (GAO) has thrown a wrench in the gears, leading these congressional celebrities to call for clarification.

In this memo, the Congress members don their superhero capes, boldly stating that SAB 121 should have no legal effect. They argue that the federal banking agencies and National Credit Union Administration should not force banks, credit unions, and other financial institutions to dance to its tune when it comes to providing custody services for digital assets. It’s like telling a lion not to roar – it’s just not going to work.

Click here to witness the memo battle

So, what’s the fuss about this particular bulletin, SAB 121? Brace yourselves, folks. According to SAB 121, banks are required to hold their customers’ crypto assets on their balance sheets, reflecting their value and demanding the maintenance of capital against them. But, wait for it…this has ruffled some feathers! Industry representatives and a gang of U.S. lawmakers have come out swinging, claiming that it treats crypto holdings differently than other assets and risks turning regulated banks away from playing the role of crypto custodians.

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Now, here’s where it gets interesting. The GAO, acting as the referee, has determined that the SEC’s SAB 121 should endure some congressional review. Oh yeah, baby! This review showdown is heating up based on a letter from Senator Cynthia Lummis to the U.S. Comptroller General in August 2022. The evaluation hot seat focuses on whether the bulletin qualifies as a rule under the Congressional Review Act. Time to bring in the big guns!

Strap in and witness the congressional oversight

These Congress members, led by the dynamic duo of Lummis and Senator Kirsten Gillibrand, along with Representatives Patrick McHenry, French Hill, Ritchie Torres, Mike Flood, and Wiley Nickel, aren’t mincing their words. They are concerned that enforcing this rule, which they consider to be a rulebreaker itself, would set a worrisome precedent. It’s like letting the fox guard the henhouse. They claim that it could give the SEC regulatory authority over institutions not authorized by Congress, all while bypassing the Administrative Procedure Act. Sneaky, sneaky!

This is not the first time these warriors have locked horns with the SEC. Back in June 2022, five senators released a fiery message to SEC Chair Gary Gensler, professing their disapproval of what they called “backdoor regulation.” And, just to turn up the heat, Flood gave Gensler an unforgettable lesson on the bulletin during his appearance before the House Financial Services Committee in September.

Step into the ring and witness the verbal sparring

And there you have it, ladies and gentlemen. It’s Congress versus the SEC in the ultimate showdown. Will the financial authorities clarify the SEC’s enforceability, or will this battle rage on? Keep your eyes peeled because the outcome could have far-reaching consequences in the realm of digital assets. Until next time, fellow investors, stay vigilant and keep those portfolios pumping!

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