KEY POINTS
- Some large banks were reportedly allowed to bypass the guidance under certain conditions
- SEC staff reportedly agreed that some business practices were not within the bulletin's jurisdiction
- Lawmakers passed a resolution in May to overturn SAB 121, but the Biden administration said it will be vetoed
A largely divisive accounting bulletin by the U.S. Securities and Exchange Commission (SEC) that Congress voted to revoke in May has once again resurfaced on the news after a new report revealed that the regulatory agency has allowed some companies and financial institutions to be exempted from the controversial bulletin.
Some large banks have been consulting with SEC staff since last year and received the approval to bypass balance sheet reporting as required by Staff Accounting Bulletin No. 121 (SAB 121) under certain conditions, Bloomberg Tax first reported Thursday, citing an SEC source familiar with the regulator's approach.
SAB 121 requires companies and institutions to report their customers' cryptocurrency holdings on their balance sheets, and under the reported arrangements with exempted institutions and companies, those exempted should offset risks posed by clients' crypto holdings.
Some companies and institutions brought forth business practices that SEC staff agreed were not under the contentious crypto accounting guidance, The Block reported further, citing a source from the regulatory agency.
There have been concerns about the bulletin making it very expensive for banks offering crypto custody services, since they will need to have a dollar of capital for each dollar of assets under their management.
In May, House representatives passed a resolution that sought to overturn SAB 121. A week later, the Senate also passed the proposed legislation, drawing praise from the crypto community. Some lawmakers who voted against the resolution expressed concerns about the bill's passage, but those who supported it said the development was a "win for financial innovation."
The White House promised that U.S. President Joe Biden would veto the resolution when it reached his table. The Biden administration also said ahead of the Senate's vote that it strongly opposed the bill, as it could disrupt the SEC's efforts to protect crypto investors and the broader financial system.
Notably, it's not just the crypto industry that has been calling on the President to sign the resolution that would repeal SAB 121. The American Bankers Association (ABA) heaped praise on the lawmakers who introduced the bill and said the bipartisan support for the resolution sent a clear message.
"Without bank custodians for digital assets, consumers are left only with unsupervised, poorly regulated options to safeguard these assets," the ABA said. The group then called on Biden to sign the resolution "to help protect American consumers."
News of the SEC's supposed softening stance toward crypto custodial offerings comes amid continuing criticism of the Biden administration's inability to rein in the SEC for its alleged regulatory "overreach."
Earlier this week, a technology coalition called on the President to support "positive legislation" for digital assets before the November elections, saying such a move can help the Democratic leader win against Republican presidential frontrunner Donald Trump.
