US SEC Might Have Violated Law

The U.S. Securities and Exchange Commission (SEC) is under scrutiny as the U.S. Government Accountability Office (GAO) filed a complaint, suggesting the SEC overlooked a crucial step when it issued guidance regarding the disclosure of custodial obligations for securing users' cryptocurrency.

GAO's assertion stems from the SEC's issuance of Staff Accounting Bulletin 121 (SAB 121) in March 2022, which specified that banks should include their customers' crypto assets on their balance sheets. The GAO claims that the SEC failed to follow the Congressional Review Act (CRA) before issuing this bulletin, emphasizing that it meets the criteria of a rule.

According to the GAO, for a rule to be effective under the CRA, the regulatory agency must submit a report to the House of Representatives, the Senate, and the Comptroller General. However, according to a recent GAO report, the SEC did not adhere to these obligations, and the bulletin should be classified as a rule under the Administrative Procedure Act (APA).

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Disputes and Commentary 

The SEC responded to the GAO's claims by asserting that the bulletin is not subject to the CRA, as it does not meet the APA's definition of a rule. However, the GAO disagreed with the SEC's stance. The SEC's failure to submit a report to Congress and the Comptroller General prior to the rule's implementation has raised significant concerns and prompted further investigations into the matter.

A number of X (formerly Twitter) members have voiced their opinions regarding this recent development, including Blockchain Association's Jake Chervinsky and Ripple's chief legal officer, Stuart Alderoty.