- SEC Chair has refused to back down amid fierce crypto backlash.
- Lawmakers and crypto advocates have locked horns over a controversial rule.
- Gensler’s unwavering stance has challenged the volatile digital frontier.
SEC Chair Gary Gensler isn’t backing down on the highly criticized Staff Accounting Bulletin (SAB) 121, a rule that’s become a flashpoint for the cryptocurrency world. Despite loud opposition from lawmakers and crypto advocates alike, Gensler insists that the rule can act as a vital shield for companies against the volatile world of digital assets.
Speaking before Congress on Tuesday, Gensler faced off with Congressman Wiley Nickel, who accused the SEC of overstepping its authority with SAB 121. Nickel blasted the rule for harming both investors and the crypto industry, while also claiming the SEC has ignored multiple requests for dialogue, but Gensler didn’t flinch.
How SEC’s SAB 121 is Shaking Up Crypto
Citing the spectacular collapses of FTX, Terraform, and Celsius, he argued that the rule is necessary to keep crypto companies from sinking under their own liabilities. “It’s a good accounting bulletin,” said Gensler in defense of the regulation.
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SAB 121 forces companies holding crypto to report those assets as liabilities on their balance sheets, a move Gensler says is crucial for managing the unpredictable nature of digital currencies. However, industry insiders see it differently.
Critics claim the rule has wreaked havoc on crypto custodians and crypto-friendly banks like Custodia and Silvergate, stifling their operations and putting a chokehold on innovation. The situation worsened when the SEC recently gave banking giant BNY Mellon a pass, allowing it to offer crypto custody services to ETF issuers—an exemption many are calling a double standard.
Emmer Exposes SEC’s Crypto Missteps
In a heated exchange, Congressman Tom Emmer took his own shot at Gensler, accusing him of making up the term “crypto asset security” to justify an aggressive crackdown on the industry. Emmer slammed the SEC’s inconsistent application of rules, branding Gensler’s tenure as “historically destructive” to crypto innovation.
He also spotlighted the SEC’s botched handling of the Debt Box case, where a failed lawsuit led to the agency paying $1.8 million in legal fees. While Gensler admitted mistakes in the Debt Box situation, his message remained clear: SAB 121 is here to stay, and the SEC won’t loosen its grip on an industry he sees as being fraught with risk.
On the Flipside
- SAB 121 may hinder innovation by forcing smaller crypto firms to list assets as liabilities, potentially benefiting larger institutions like BNY Mellon.
- The rule disproportionately affects smaller businesses, limiting their operational flexibility and entrenching larger players.
- The rule contradicts crypto’s decentralized ethos, reinforcing centralized control and undermining the technology’s core principles.
Why This Matters
The enforcement of SAB 121 highlights the tension between regulatory oversight and crypto innovation, treating digital assets as liabilities and creating operational challenges for custodians and banks. This clash could stunt growth and reshape risk management in the industry, marking a pivotal moment as crypto navigates regulatory headwinds.
For details on the Ripple-SEC legal battle, including the SEC’s appeal deadline and Ripple’s Swell conference plans, read here:
Ripple Gears Up for SEC Appeal as October Deadline Looms
For more on the lawsuit between the SEC and Kraken, where Kraken argues digital assets are not securities, read here:
Kraken Fights for the Industry in Its Lawsuit Against SEC
