SEC Relaxes Crypto Reporting Rules for Banks and Brokerages
The US Securities and Exchange Commission (SEC) issued new exemptions on July 11, adding a provision that frees financial institutions from disclosing the cryptocurrency holdings of their customers in the balance sheet.
The relaxation of this regulation is not free, though. Banks and other financial institutions can receive this exemption only if they prove that they are capable of dealing with the risks that come with digital assets.
Depth Details into SEC Crypto Report Overturn
Bloomberg’s report yesterday on the US Exchange Commission issuance of guidance that some crypto-related transactions would not be recognized as liabilities for financial statement reporting purposes, opened a new chapter in the relationship between the agency and large banks, which have been in consultations since 2023.
Those financial institutions, which have been allowed to report on some other condition, are required to assure clients that their money is secured in the event of bankruptcy. Just two years after SAB 121’s controversial release, the Securities and Exchange Commission took a significant step with its new decision to relax crypto reporting rules. The purpose of this instruction was to bring about more transparency and risk management in a rapidly changing crypto environment.
Explanation under the SAB 121 section includes the fact that custodial obligations were to be accounted for as liabilities on balance sheets and detailed information about the risks involved. The regulation was indeed put into effect this way which led to raucous debates with the sectoral stakeholders saying that the provision was too broad and that it was a burden for the government to impose the need for passage of such laws among businesses effecting the entrepreneurial innovation.
Congressional Pressure on SAB 121 Precedes SEC Crypto Report Exemptions
The Securities and Exchange Commission announcement of new cryptocurrency reporting that will be exempt from reporting coincided with the ongoing problem that Congress currently handles as the SAB 121 is yet to be clarified. On May 16, the US Senate voted to remove the accounting bulletin. Although the resolution, HJ Res. 109, had the support of most of the Senators (60 in favor, 38 opposed), the resolution was not passed.
Within a few weeks after the decision was made, President Joe Biden used his veto power to counter the resolution thus sticking to SAB 121 in that he referred to it as being a reflection of the “considered technical” judgment of SEC staff. Moreover, the president emphasized that scrapping the bulletin would make the regulator incapable of handling the problems and dangers of the cryptocurrency industry effectively.
On July 11, the House of Representatives made an effort to discourage the present’s veto and achieved a vote of 228 in support, 184 against, and 21 abstentions, but fell shorter than the two-thirds of the total votes needed.
That very day, the Securities and Exchange Commission announced that banks and brokerages would be granted exemptions for crypto reporting. This surprised the stakeholders and raised questions about whether the SEC might meet its expectations with the pressure coming from the lawmakers who push for a more flexible regulatory system for the crypto sector.
In a piece published in Fox, Eleanor Terrett wondered if a case of lobbying in Congress for exemptions might be the cause, as they are the ones that have been at the forefront of pushing for tightening the control of the crypto industry.
