Rep. Wiley Nickel of North Carolina criticized the Securities and Exchange Commission over its handling of a controversial bulletin that details how firms should account for holding cryptocurrencies.
The Democrat said the bulletin could make digital assets less safe, days after a congressional watchdog, the Government Accountability Office, said the SEC needed to go in front of Congress before the bulletin could be effective.
"I'm happy that Congress will now get a say on this rule," Wiley said on Thursday during a House Financial Services subcommittee hearing. Wiley is also a member of the House Financial Services Subcommittee on digital assets, financial technology and inclusion.
"The GAO decision is just the latest in a series of losses for the SEC demonstrating the agency's disregard for the statutorily required processes in the Administrative Procedures Act," Wiley said. The Administrative Procedures Act, or APA, governs how federal agencies develop and issue rules.
The SEC's Staff Accounting Bulletin No. 121, or SAB 121, was issued in March 2022 and requires firms that custody crypto to record customer holdings as liabilities on their balance sheets.
The bulletin is subject to the Congressional Review Act, which requires that before a rule can go into effect, agencies have to submit a report on the rule to Congress, the GAO said on Tuesday.
SEC Chair Gary Gensler defended the bulletin back in April during a House Financial Services Committee hearing.
"What they [SEC staff] said was that public companies, not just banks, that public companies needed to put on their balance sheet if they had their customer crypto because what we subsequently found in bankruptcy court, Celsius bankruptcy and others, that in bankruptcy, investors just stand in line," Gensler said.
Other lawmakers weigh in
Rep. Patrick T. McHenry, R-N.C., who chairs the House Financial Services Committee said the bulletin would "impose massive new requirements on financial institutions."
"Ultimately, this would deter institutions and firms from offering custodial services — denying Americans access to safe and secure custody of their assets," McHenry said in a statement. "SAB 121 was drafted with zero input from prudential regulators and the public, and now Congress must step in to block this harmful rule.”
Sen. Cynthia Lummis, R-Wyo., a member of the Senate Banking Committee, said the bulletin should have been in the form of an official rule.
"This sets an incredibly dangerous precedent," Lummis said on Tuesday in a statement. "I plan to use the Congressional Review Act to block this rule in the coming weeks."
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