Bad news from the House committee to the SEC

The set of rules called “Employee Accounting Bulletin No. 121”, written by SEC employees in March 2022 and officially published on March 31 of that year, was not accepted by the Financial Services Committee of the House of Representatives. In its vote yesterday, the committee decided to completely revoke the validity of this bulletin, with a vote of 31 to 20.

In order for this cancellation proposal to be officially accepted, it must first be submitted to a general vote in the House of Representatives to which the committee is affiliated, and if it is accepted there, it must be sent to the Senate for a new vote. If the Senate accepts it, the cancellation of the proposal will then become official.

Why there is a reaction to the bulletin: Recording in the balance sheet

The set of rules, also known as “SAB 121” for short, states that organizations that store and hold cryptocurrencies must show these assets on their balance sheets. Experts state that this situation will seriously affect the financial statements and requirements of companies.

In addition to cryptocurrency companies, banks that are now considering providing crypto custody services in the USA also strongly oppose this bulletin.

SAB 121 also states that organizations must clearly explain to users and customers the risks of storing and receiving crypto.

There was pressure for cancellation and revision

It is worth noting that SAB 121 is actually a recommendation bulletin. In other words, there is no official set of rules that must be applied. Analysts state that this bulletin is only the opinions of those working in the relevant department of the SEC and does not represent regulations.

The crypto world, on the other hand, opposes this bulletin, which may become law in the future, because it imposes heavy burdens on companies. There has been pressure on the SEC for nearly 2 years to withdraw or broadly revise this bulletin.

“It could also affect Bitcoin spot ETFs”

Mike Flood, the House member who introduced the proposal, said that for banks, custody assets, including securities, have always been considered “off-balance sheet” items.

The two-page motion, submitted by Flood and another council member, Wiley Nickel, aims to repeal the bulletin entirely.

Flood also said SAB 121 could also affect spot bitcoin exchange-traded funds, which were approved by the SEC in January. Because of SAB 121, banks cannot be custodians for these ETFs, Flood said.

Republicans and Democrats are at odds on this issue too…

Maxine Waters, one of the most well-known names on the Democratic side, opposed Republican Congressman Flood’s statements and claimed that the bulletin actually reflected the demands of the crypto world, which has been seeking transparency for a long time.

“The crypto world has long complained that the SEC does not set clear rules and operates through enforcement, not regulation,” Waters said. “This bulletin has been prepared to prevent events like FTX, where users lost billions of dollars of assets once again, from occurring again,” he said.

Secret Service Act was also passed

On the other hand, the Committee also approved yesterday a bill that expands the powers of the secret services working in the USA to combat money laundering through cryptocurrencies.