Cryptocurrency Regulation: A Battle Between Wall Street and the SEC

The world of cryptocurrency is no stranger to controversy, and the latest battle between Wall Street and the Securities and Exchange Commission (SEC) is no exception. At the heart of the matter is the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), a controversial accounting standard that has sparked outrage among cryptocurrency companies and bankers alike.

SEC Chair Gary Gensler

SAB 121: A Threat to Cryptocurrency Businesses

SAB 121 requires banks to treat customers’ digital assets differently than other assets, demanding they be kept on a bank’s balance sheet. This has sparked outrage among cryptocurrency companies, who argue that this threatens their ability to do business with banks. The bankers agree, stating that this would subject them to higher capital, liquidity, and other prudential requirements, unlike their non-bank competitors.

“SAB 121 effectively precludes regulated banking organizations from offering digital asset custody at scale since it treats the assets as if they are owned rather than simply custodied by a banking organization.” - Letter to President Biden

The Battle for Repeal

In a rare show of unity, Wall Street banks and members of Congress are asking President Joe Biden to reverse course on his vow to veto the congressional resolution to overturn SAB 121. The lobbying groups for big-bank interests in Washington sent a letter to the White House, asking the president to step back from his stated intention to kill Congress’ effort to cancel the controversial crypto policy.

Wall Street Asks Biden Not to Veto Congress’ Rejection of SEC Crypto Policy

The letter came the same day Sen. Cynthia Lummis (R-Wyo.) and Rep. Patrick McHenry (R-N.C.) published their own letter to Biden, dated May 30, similarly asking him to not veto, or at least “work with the SEC to rescind the staff guidance.”

“Rescinding SAB 121 is well within the SEC’s authority and there is ample precedent for revisiting a staff accounting bulletin.” - Letter to President Biden

The Future of Cryptocurrency Regulation

As the battle between Wall Street and the SEC continues, one thing is clear: the future of cryptocurrency regulation hangs in the balance. Will the SEC’s controversial accounting standard be overturned, or will it stand as a testament to the regulatory body’s commitment to protecting investors? Only time will tell.

Cryptocurrency Regulation