In a recent development, the Government Accountability Office (GAO) has stated that the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121) qualifies as a rule and subsequently, should have been submitted for congressional review. This assertion was disclosed on October 31.
SAB 121 is a directive that explains how SEC staff predict companies will handle and report their custodial duties in relation to providing crypto-asset services. The bulletin suggests that crypto businesses may need to show these obligations as a liability on their financial statements. This review from the GAO might signal a new push for even more regulation in the fast-growing digital asset sector.
This opinion from GAO is based on the requirements and stipulations set forth by federal law. The Federal Register Act, 1935, and the Congressional Review Act, 1996, require agencies to file their rules with both the Congress and the GAO. Both these laws maintain that a rule must be filed to ensure that the Congress retains its legislative supervisory powers.
However, the SEC has so far neglected to make that submission for SAB 121, raising concerns about its regard for legislative oversight. Considering the novelty and intricate nature of digital assets and blockchain technology, ensuring clear lines of communication and accountability among regulatory bodies seems essential.
This development was reported in an article written by Orrick, Herrington & Sutcliffe LLP at JD Supra.
The situation brings into sharp relief the ongoing need for clear guidelines regarding the treatment of digital assets and cryptocurrencies. Existing federal law and public sentiment reflect a demand for transparency, oversight, and protections for those engaging in crypto-asset services.
Looking ahead, more thorough congressional review may prompt more refined, comprehensive laws to better address the unique challenges and demands of this burgeoning sector of finance. This could foster a more favorable climate for crypto-businesses, and show potential investors and stakeholders that digital assets are being suitably regulated and scrutinized by top-tier bodies such as the SEC and the Congress.