The US Securities and Exchange Commission (SEC) may have violated the Congressional Review Act (CRA), according to the Government Accountability Office (GAO).
In GAO’s published findings on their official site, the regulatory agency violated the “Staff Accounting Bulletin 121” (SAB 121), which is a guidance from the SEC back in March 2022 that addresses accounting obligations from the reporting entity (e.g. exchanges, custodians, payment processors, and financial institutions) to safeguard crypto assets held by crypto users.
GAO Raises Some Questions
The CRA mandates that federal agencies must submit a report on the new rules to both Houses of Congress and the Comptroller General before it can take effect.
The report includes a copy of the rule, a concise general statement, and the proposed effective date.
The GAO determined that the Bulletin qualifies as a “rule” and not as mere “guidance” for the CRA because it meets the definition of a rule under the Administrative Procedure Act (APA).
“It is reasonable to believe that companies may change their behavior to comply with the staff interpretations found in the Bulletin. The Bulletin is also of future effect and was designed to interpret and prescribe policy. Accordingly, we conclude that the Bulletin meets the definition of rule under APA,” the GAO said in its official statement.
Crypto Industry and Lawmakers Seek Reevaluation
Vice President of Policy at the Chamber of Digital Commerce Cody Carbone, accused the agency of “gaslighting the GAO” in a tweet on X.
“This is a blow to the SEC and a win for clear, fair custody rules for digital assets. Time will now tell whether Congress moves to disapprove this rulemaking,” Carbone highlighted.
Chief Legal Officer at Variant Fund Jake Chervinsky also called for the immediate withdrawal of SAB 121.
“The GAO reviewed SAB 121, an illogical anti-crypto accounting bulletin issued by the SEC last March, and found that it’s a “rule” under the CRA and APA. The SEC didn’t comply with either. This is a clear statement from a federal agency that the SEC broke the law,” Chervinsky said.
SEC’s Response Remains Unclear
At the time of writing, the SEC has not made any official statements regarding the current issues concluded by the GAO.
The ongoing controversy is an allegory of the challenges currently faced by regulatory bodies in the United States on cryptocurrencies and blockchain technology.
Regardless, the crypto community continues to see Gary Gensler and the SEC acting unlawful. This is another black mark for the agency showing they are not abiding by the laws and have fallen far from their core mission which is to protect investors.