The U.S. House Financial Services Committee, during its hearing on Thursday, February 29, 2024, moved to advance legislation that minimizes the U.S. Securities and Exchange Commission’s oversight on crypto and digital assets.
The legislation was initiated by U.S. Representatives Wiley Nickel and Mike Flood, and it aims to capitalize on the Congressional Review Act to revoke what they called “unlawful rule.”
This newly proposed legislation, known as the Crypto-Asset National Security Enhancement and Enforcement Act of 2023 (S.2355), will overturn a specific SEC guideline—the Staff Accounting Bulletin 121 (SAB).
Staff Accounting Bulletins, including SAB 121, function as non-binding guidelines formulated by the securities regulator to assist companies in aligning their activities with the law. These guidelines do not undergo public notice or comment periods typical for more formal rules. However, the regulator can enforce them.
SAB 121, in particular, has posed significant hurdles for banks seeking involvement in cryptocurrency custody services.
The new bill got bipartisan support, with a voting result of 31 in favour and 20 against. However, it requires approval through a full floor vote in both the House and the Senate before the repeal of SAB 121 can take effect.
Jake Chervinsky, Variant’s Chief Legal Officer, commended the move but expressed scepticism about the possibility of successfully repealing SAB 121 in Congress, suggesting this might mark the “end of the story” for the new regulation.
U.S. Representative Mike Flood, sharing his optimism in a post on X, emphasized that the SEC’s SAB has prevented regulated banks from becoming custodians for crypto assets, and it was time to end the SEC chair, Gary Gensler’s “overreach.”
Gensler has been at the centre of various controversies regarding the crypto industry, as various entities and prominent figures accuse the SEC chair of excessive interference in the sector. Notably, in 2023, the SEC Chair argued that a majority of cryptocurrencies are subject to securities laws and that it has no plans of backing down from its classification of the majority of digital assets.
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