Crypto Victory: GAO Asserts Congressional Oversight for SEC's Controversial Guidance


Senator Lummis' Triumph in the Crypto World

In a significant win for the crypto community, United States Senator Cynthia Lummis has secured a game-changing decision from the Government Accountability Office (GAO). This decision, made on October 31, calls for congressional scrutiny of the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin 121. Issued in March 2022, this bulletin had drawn the ire of numerous pro-crypto lawmakers.

A Game-Changer for Crypto Regulation 

Lummis initiated the GAO's involvement by sending a letter to the U.S. Comptroller General in August 2022. The key question was whether the SEC bulletin should be subject to the Congressional Review Act (CRA). The GAO's verdict, based on the Administrative Procedures Act's definition of a rule, determined that the SEC bulletin indeed falls under the CRA. This finding opens the door for Congress to potentially disapprove of the rule, fundamentally altering crypto regulation.

The bulletin, known as Staff Accounting Bulletin 121, offers guidance on how companies should account for crypto-assets held for platform users. While the SEC emphasized that it's not an official rule but merely staff interpretations, it had far-reaching implications. It recommended a significant shift in accounting practices by advising platforms to record users' assets as liabilities and assets at their fair value, a departure from previous practices. This sparked rapid objections from various quarters, including SEC Commissioner Hester Peirce and five Republican senators, including Lummis, who decried it as "backdoor regulation."

It's essential to note that GAO findings serve as recommendations, but agencies often heed their advice, making this development a crucial milestone in shaping the regulatory landscape for the crypto industry.

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