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Cryptocurrency News Articles
SEC Chair Gary Gensler Defends Crypto Custody Regulation Firmly
Sep 26, 2024 at 02:51 am
SEC Chair Gary Gensler has assured Congress during a congressional testimony that the Staff Accounting Bulletin (SAB) 121 will continue to be operational.
SEC Chair Gary Gensler testified before Congress on Thursday, assuring lawmakers that the Staff Accounting Bulletin (SAB) 121 will remain in place. He cited the recent high-profile crypto bankruptcies, such as FTX and Celsius, as evidence of the rule's necessity.
Gensler highlighted that SAB 121 is crucial in shielding investors from the risks associated with digital assets. He explained that the bulletin was created in response to novel risks emerging within the crypto sector.
However, Wiley Nickel, a Republican member of Congress who has been a vocal critic of the rule, accused the SEC of overreach. He pressed Gensler on the rule's negative impact on the economy and its hindrance to many crypto-friendly companies.
Gensler Defends Crypto Custody Regulation Firmly
Nickel raised concerns about the application of SAB 121 to crypto custodians and other financial institutions. He stated that the SEC had failed to respond to multiple inquiries from his office on the matter, suggesting that the agency was overstepping its authority.
Nickel asked Gensler if he felt any remorse for the rule, which had dealt a blow to the crypto industry. Gensler countered that the rule is essential in ensuring that companies providing crypto custody services are held fully accountable.
He emphasized that accounting practices require a stricter set of rules for digital assets due to the unique risks they pose within the accounting system. Despite facing criticism, Gensler maintained his support for the bulletin.
Nickel also pointed out the inconsistency in the SEC's application of SAB 121. He noted that the regulator permitted large institutions, such as BNY Mellon, to evade the rule and provide crypto custody services with fewer requirements. Notably, within the crypto industry, there have been claims that such actions are "unethical" and harm small investors.
Gary Gensler Accused of Stifling Crypto Innovation
During his testimony, Tom Emmer, a Republican congressman from Minnesota, criticized Gensler for stifling innovation within the crypto space through excessive regulation. Emmer also highlighted Gensler's use of the term "crypto asset security," stating that Emmer's legal team was unable to find a definition for this term.
He added that the SEC Chair had invented the phrase to advance his regulatory agenda. Emmer asserted that Gensler is inconsistent in applying the rules he sets for the development of the crypto industry.
Emmer also accused the SEC of engaging in regulation by enforcement rather than providing guidance. Gensler defended the SEC's approach, stating that it falls within the agency's mandate to protect investors and maintain market integrity.
The congressman also brought up the Debt Box case, in which the SEC's lawsuit was dismissed. He noted that the court ruling ordered the SEC to pay $1.8 million in fees, which, according to Emmer, clearly showed that the agency had overstepped. Gensler acknowledged that the agency had made a mistake in the case and accepted the court's decision, but he maintained that there was no evidence of wrongdoing.
SAB 121 Criticized for Stifling Small Firms
Critics have argued that SAB 121 has been particularly damaging to small firms and so-called crypto companies, hindering their ability to compete. The rule mandates that financial institutions disclose their custodial assets, which has proven to be a costly exercise, especially for the smaller players.
Meanwhile, others, such as BNY Mellon, have been excluded, claiming exemptions, which have been viewed as unfair. Top figures within the crypto industry are among those criticizing SAB 121, claiming that the bill is anti-competitive. They assert that the rule has forced many firms to shut down their operations while allowing big banks to ramp up their crypto offerings. The partiality in granting exemptions to key market players has further fueled the resentment among the remaining stakeholders.
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