A bipartisan coalition of lawmakers has urged the Biden administration to abandon its plan to veto Congress’ proposal to implement the SEC’s controversial Staff Accounting Bulletin No. 121 (SAB 121). to pull.
The letter, dated May 30, urged the administration to urge the SEC to withdraw the standard or sign Congress’ proposal to repeal the accounting standards into law.
Bypassing traditional processes
The letter highlighted the potential risks that the current accounting treatment for digital assets poses to consumers and the financial sector.
SAB 121, published on March 31, 2022, requires entities that protect digital assets for customers to consolidate these assets on their balance sheets and provide specific information.
According to the letter, this requirement differs from the accounting treatment of other asset classes and may expose consumers to increased risks by discouraging regulated financial institutions from managing digital assets.
The lawmakers highlighted that the Government Accountability Office (GAO) has classified SAB 121 as a rule under the Administrative Procedure Act (APA) and the Congressional Review Act (CRA).
The letter criticized the SEC for bypassing the traditional notice-and-comment rulemaking process, which allowed the SEC to avoid a full committee vote and prevented stakeholders from providing input.
Bipartisan support for repeal
The letter emphasized that reviewing and withdrawing employee accounting bulletins is within the SEC’s authority, noting that most of the past three decades have involved revisions or withdrawals.
The lawmakers wrote that despite this precedent, SEC Chairman Gary Gensler has remained steadfast in enforcing the guidelines of SAB 121, to the detriment of the industry.
The signatories of the letter, including Senators Cynthia Lummis and Representatives Patrick McHenry, Andy Barr, Tom Emmer, Mike Flood, French Hill, Dan Meuser, Wiley Nickel and Ritchie Torres, argued that bipartisan support for HJRes.109 – a resolution that expresses disapproval of SAB 121 – demonstrates widespread opposition to the rule.
The lawmakers urged President Biden to sign the resolution into law or work with the SEC to withdraw the guidance. In the letter was written:
“Congress has spoken: the SAB 121 CRA vote sent a clear, bipartisan message to the SEC that this misleading policy is harmful to consumers and that the staff’s guidance was inappropriate to impose policy changes and must be reversed.”
The lawmakers warned that if Chairman Gensler continues to enforce SAB 121, the resolution disapproving the rule should be passed into law or take effect.
The ongoing debate over SAB 121 reflects broader tensions regarding the legal treatment of digital assets and the role of financial institutions in managing these emerging financial instruments.