- The US government accused the SEC of neglecting a crucial step in the deprivation of liberty.
- This situation has sparked a debate over whether the bulletin should be categorized as a ‘rule’.
On October 31, the US Government Accountability Office expressed are concerned about a cryptocurrency-related bulletin issued by the US Securities and Exchange Commission (SEC).
Notably, the accountability office accused the SEC of neglecting a crucial step in providing guidance regarding accounting and disclosure of holds. This was related to protecting users’ cryptocurrency holdings.
The allegation primarily revolves around the SEC’s failure to submit mandatory reports to Congress under the Congressional Review Act (CRA) and the Comptroller General before implementing regulations.
This situation has sparked a debate over whether the bulletin should be categorized as a ‘rule’. The accountability agency has argued that the bulletin meets specific definitions of a rule under the Administrative Procedure Act (APA), which necessitates the filing of the necessary reports.
In response, the SEC argued that the bulletin is generally ineligible because it lacks the hallmarks of an agency action or a binding agency statement.
Battle over legal classification
The consequences of this dispute remain uncertain. It also raises questions about the accountability office’s enforcement authority as an independent agency within the U.S. Legislature.
The origin of this controversy dates back to March 24. The SEC published the relevant guidance in Staff Accounting Bulletin No. 121 (Bulletin).
This bulletin recommended that companies should record protected cryptocurrencies as a liability on their balance sheets at fair values, along with the associated assets.
However, this shift from traditional practices sparked controversy among Republican lawmakers, who expressed concerns about its implications. They argued that this change contradicted established banking practices, particularly with regard to the off-balance sheet treatment of custody assets.
One congressman, Andy Barr (R-Ky.), expressed concern that such changes could prevent banks from offering digital asset custody services.
SEC Chairman Gary Gensler defended the guidelines. He emphasized the importance of both banks and public companies to include relevant information about cryptocurrencies on their balance sheets.
The SEC has received a wave of criticism from many for dealing with crypto companies without clear regulations. Hester Peirce, a commissioner at the SEC, criticized the SEC’s handling of the indictment against crypto startup LBRY.
Peirce expressed concerns about the lack of clarity and a clear path for companies like LBRY to register their functional token offerings. For the uninitiated, LBRY recently announced its closure after the SEC accused the company of selling unregistered securities.
