House Republicans Propose SEC Budget Cuts Impacting Cyberattack Disclosure Rule Affecting Coinbase

• House Republicans have unveiled a proposal to reduce the SEC’s 2026 budget by 7%, targeting enforcement funding for a Biden-era cybersecurity disclosure rule affecting public companies.

• The proposed cuts aim to restrict the SEC’s ability to enforce timely cyberattack disclosures, reflecting GOP efforts to roll back regulatory measures introduced under the current administration.

• According to COINOTAG sources, the move has sparked bipartisan debate, with Democrats warning it could undermine investor protections and corporate accountability in the evolving crypto landscape.

House GOP proposes 7% SEC budget cut, targeting enforcement of cyberattack disclosure rules amid pushback from Democrats and industry stakeholders.

SEC Faces 7% Budget Reduction and Enforcement Restrictions Under GOP Proposal

The House Appropriations subcommittee has advanced a funding plan that would allocate just over $2.03 billion to the SEC for fiscal year 2026, marking a 7% decrease from the previous year’s budget. This reduction includes specific prohibitions on using funds to enforce the cybersecurity incident disclosure rule enacted in mid-2023, which mandates public companies and foreign private issuers to report cyberattacks within four days unless national security concerns apply.

This rule also requires annual disclosures of cyber risk management strategies, a measure designed to enhance transparency and investor confidence in an era of increasing digital threats. The GOP’s budget proposal contrasts with the SEC’s recent request for $2.149 billion to support its expanding regulatory responsibilities, including overseeing the rapidly evolving crypto market.

Banking Groups and Crypto Firms Criticize Cybersecurity Disclosure Rule

Several banking advocacy groups have publicly urged the SEC to repeal the cybersecurity disclosure requirement, arguing it inadvertently facilitates ransomware extortion by making attack information publicly accessible. This concern resonates with crypto firms like Coinbase, which disclosed in May that bribed contractors leaked user data, triggering multiple lawsuits and a rejected $20 million ransom demand. Coinbase estimates potential damages could reach up to $400 million, highlighting the complex interplay between regulatory compliance and cybersecurity risks in the crypto sector.

Democratic Opposition Highlights Risks of Reduced SEC Funding

Democrats on the House Appropriations Committee have strongly criticized the GOP’s budget plan, describing it as detrimental to consumer protection and corporate accountability. The proposal also restricts the SEC from collecting personally identifiable information through its longstanding equity and options trading surveillance system and limits rulemaking on private securities offerings.

Committee Ranking Member Rosa DeLauro emphasized that the cuts would enable corporations to evade regulations, potentially harming everyday investors and consumers. This partisan divide underscores the broader debate over the SEC’s role in regulating emerging financial technologies and safeguarding market integrity.

Implications for Crypto Regulation and Market Oversight

The proposed budget reductions and enforcement limitations come at a critical juncture for crypto regulation, as the SEC continues to explore frameworks for digital assets and token standards. Reduced funding could hamper the agency’s ability to enforce compliance, investigate misconduct, and implement new rules tailored to the unique challenges posed by cryptocurrencies and blockchain technology.

Industry observers note that maintaining robust regulatory oversight is essential to fostering investor trust and preventing fraud, particularly as crypto markets mature and integrate with traditional financial systems.

Conclusion

The House Republicans’ plan to cut the SEC’s budget and restrict enforcement of cybersecurity disclosure rules represents a significant shift in regulatory priorities. While proponents argue it curbs excessive spending and regulatory overreach, critics warn it may weaken protections against cyber threats and reduce transparency in financial markets. As the debate unfolds, stakeholders across the crypto and financial sectors will closely monitor how these funding decisions impact the SEC’s capacity to oversee a rapidly evolving landscape.