Senators join chorus of disapproval of ‘backdoor regulation’ in SEC staff accounting bulletin
United States Senator Bill Hagerty has sent a letter, cosigned by four other Republican senators, to Securities and Exchange (SEC) Commission chair Gary Gensler urging the withdrawal of a staff accounting bulletin, referred to as SAB 121, issued by the agency March 31. According to the senators, the bulletin amounts to “regulation disguised as staff guidance” and does not adhere to the Administrative Procedure Act.
SAB 121 provides guidance on accounting and disclosure for companies that safeguard clients’ crypto assets and allow them to perform transactions with them. The bulletin said those companies, which include platforms such as Coinbase and Robinhood, should list digital assets as liabilities on their balance sheets at fair value. The need for the new accounting procedure was chocked up to “increased risks” from cryptoassets.
The senators’ letter pointed out that SEC staff provide guidance on existing regulations, but no regulations are cited in SAB 121, and the bulletin was worded as though compliance was an expectation, even though a staff bulletin is not intended to create enforceable obligations. The letter goes on to criticize SEC policy more broadly:
In addition to Haggerty, the letter was signed by Sens. Cynthia Lummis, M. Michael Rounds, Thom Tillis and Mike Crapo. SAB 121 elicited an immediate unfavorable response from SEC commissioner Hester Peirce, who also criticized “the way the change is being made.”
Coinbase caused a momentary stir in May when it included a statement that “In the event of a bankruptcy, the crypto assets we hold on behalf of our customers may be subject to bankruptcy proceedings” in its first-quarter report to the SEC. CEO Brian Armstrong took to Twitter to explain that the statement
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