- U.S. House lawmakers will debate new legislation aimed at restricting the SEC’s authority over a contentious crypto accounting rule.
- The proposed bill includes substantial budget cuts and specific limitations on the SEC’s regulatory powers.
- Critics argue that the SEC’s rule imposes unnecessary requirements on crypto custodians, sparking bipartisan efforts to counteract the mandate.
House lawmakers clash over proposed restrictions to SEC’s crypto accounting rule, significantly shaping the future of digital asset regulation in the U.S.
House Proposes Budget Cuts and Regulatory Restrictions for SEC
Lawmakers in the U.S. House of Representatives are set to debate a crucial piece of legislation that, if passed, will impose new financial and regulatory constraints on the Securities and Exchange Commission (SEC). The House Committee on Appropriations has outlined a bill that slashes the SEC’s budget by nearly $145 million and imposes stringent limitations on its ability to enforce the controversial Staff Accounting Bulletin (SAB) 121.
Bipartisan Efforts to Overturn SEC’s Crypto Rule
Both the House and Senate have recently garnered bipartisan support to pass a bill to eliminate the SEC’s crypto accounting rule, SAB 121, which requires companies to classify customers’ crypto assets as liabilities on their balance sheets. Despite bipartisan votes, the measure was vetoed by President Joe Biden. Overriding this veto would require a two-thirds majority in both chambers, a challenging threshold to meet. Meanwhile, the new spending bill provides an alternative route to curtail the SEC’s regulatory reach by including similar restrictions within its provisions.
SEC’s Enforcement Authority Under Scrutiny
The proposed bill goes beyond budget cuts by also restricting the SEC’s ability to enforce its rules surrounding digital asset transactions, except in clear cases of fraud or market manipulation. The bill prohibits the SEC from broad regulatory actions until it clarifies which digital assets qualify as securities under the current law or until new regulatory frameworks are established.
Impact of Budget Reductions on SEC’s Operations
The bill proposes a significant reduction in the SEC’s budget to $2 billion for the upcoming fiscal year, which is $590 million less than what the SEC had requested and even below the current fiscal year’s allocation of nearly $2.2 billion. This decrease in funding is intended to curtail what critics describe as the “aggressive” nature of the SEC’s Enforcement Division, particularly its oversight of the digital assets industry, which the SEC has characterized as “rife with noncompliance.”
Reactions from Lawmakers and Industry Experts
Lawmakers supporting the bill, such as Rep. Tom Cole (R-OK), argue that SAB 121 enforces undue burdens on the digital asset sector and represents an overreach by the SEC. “The bill provides sensible cuts to federal financial and consumer protection agencies and restricts funding for their overextending regulatory policies,” said Cole in prepared remarks. Industry experts and advocates for digital assets have supported these efforts, claiming that the current SEC regulations stifle innovation and burden companies with unnecessary compliance requirements.
Conclusion
As the debate unfolds, the future of crypto regulation in the United States hangs in the balance. The proposed spending bill not only reduces the SEC’s budget but also curtails its regulatory powers, reflecting growing political and industry resistance to its current approach to digital asset regulation. These developments will be critical in shaping the landscape of the U.S. crypto market and its governance in the coming years.
