Two United States lawmakers have criticized crypto accounting guidelines outlined by the national securities regulator, arguing they places crypto customers at greater risk of loss.
The guidelines came from the United States Securities and Exchange Commission and became effective in April last year.
The guidelines ask financial companies holding crypto for customers to recognize all digital assets they do not control as a liability. They also state that digital assets should be backed by a safeguarding asset.
Crypto companies must show liabilities equal to ALL customer crypto assets, according to SEC’s new rule SAB 121 issued in March 2022.@coinbase complied for their Q2 filing and now shows an $88B “customer crypto liabilities” item. https://t.co/59029Pr2LE
— Cory Swan.com #Bitcoin WORKS (@coryklippsten) August 15, 2022
However, Senator Cynthia Lummis and Representative Patrick McHenry argued on March 2 that these guidelines will “likely” discourage regulated entities from engaging in digital asset custody, which is the opposite effect of what the regulator should be doing.
In a letter to ranking individuals with the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration, the lawmakers argued that while Staff Accounting Bulletin (SAB) 121 was intended to provide clarity on accounting treatment for digital assets, it carried negative side effects. They wrote:
“SAB 121 places customer assets at greater risk of loss if a custodian becomes insolvent or enters receivership, violating the SEC’s fundamental mission to protect customers.”