US lawmakers claim that SEC accounting rules put cryptocurrency users in danger
Both the lawmakers and the regulators have condemned the news that was calculated to make the accounting treatment for digital assets clear.
National security outlined regulators that the 2 US lawmakers have condemned crypto accounting guidelines. They are of the view that these guidelines put the users of crypto at a greater risk of loss.
It implied the guidelines in April 2022. These came into existence from the US Securities and Exchange Commission.
According to the rules, financial institutions that store cryptocurrency for their clients need to classify any digital assets they do not own as a liability. They also say that there must be some security for digital assets.
On March 2, Senator Cynthia Lummis and representative Patrick McHenry insisted that due to these guidelines, the regulatory bodies will refrain from taking custody of the digital assets. While the regulators should do the opposite of that.
The lawmakers insisted in a letter to ranking persons with the Federal Reserve System, the Office of the controller of the currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration. They said that the Staff Accounting Bulletin (SAB) imparted negative effects with it. Although its purpose was to provide clarity on accounting treatment for digital assets. They said:
” SAB 121 places customer assets at greater risk of loss if a custodian becomes insolvent or enters receivership, violating the SEC’s fundamental mission to protect customers.”
They further insisted that its effect will be to ” deny millions of Americans access to safe and secure custodial arrangements for digital assets.”
They also disapproved that the ” breadth of the digital asset definition in SAB 121″ insisting that ” a more nuanced hierarchy for this asset class which considers the opportunities and risks of digital assets with different functions is necessary.”
The lawmakers including Lummis evoked an uproar in the past over the SEC accounting bulletin.
On June 16, last year, five Republican Senators including Lummis wrote a letter to SEC and raised an issue that this bulletin is up to ” regulation disguised as staff guidance.” They said that it was not in accordance with the Administrative Procedure Act.
Just after the release of the bulletin, on March 13, SEC commissioner Hester Pierce agreed with the issues raised above. She stated that it was ” the way the change is being made”. She described the change as,
“Yet another manifestation of the Securities and Exchange Commission’s scattershot and inefficient approach to crypto.”