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SEC Relaxes Crypto Reporting Rules for Banks and Brokerages

14.07.2024
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The US Securities and Exchange Commission (SEC) announced new exemptions on July 11, freeing banks and brokerage firms from reporting customers’ crypto holdings on financial statements.

This regulatory relief, however, hinges on a crucial condition: financial institutions must prove their ability to manage digital asset risks effectively.

Depth Details into SEC Crypto Report Overturn

Bloomberg reports that the US SEC has begun issuing guidance clarifying that some crypto-related arrangements might not qualify as liabilities for financial statement reporting purposes.

This shift holds particular significance for large banks engaged in consultations with the SEC since 2023.

These institutions have secured conditional approval to bypass the reporting requirement, contingent upon their ability to guarantee the safeguarding of customer assets in bankruptcy scenarios.

Several large banks have got the green light from SEC staff to bypass strict balance sheet reporting requirements on crypto by ensuring their customers’ assets would be protected in the event of a bankruptcy or failure, per @Aiacone https://t.co/6lyELKnOeu

— Emily Nicolle (@emilyjnicolle) July 11, 2024

The SEC’s recent move to relax crypto reporting rules comes two years after the introduction of its controversial SAB 121 guidance. This guidance sought to enhance transparency and risk management within the dynamic crypto landscape.

Under SAB 121, custodial obligations were to be recognized as liabilities on balance sheets, accompanied by comprehensive disclosures regarding associated risks.

SAB 121’s implementation, however, sparked considerable controversy. Industry stakeholders viewed the regulation as exceeding the SEC’s authority, asserting it placed undue burdens on businesses and hindered innovation.

Critics further contended that the regulation failed to draw a clear distinction between cryptocurrencies on public ledgers and traditional assets on permissioned ledgers, ultimately complicating compliance efforts.

Congressional Pressure on SAB 121 Precedes SEC Crypto Report Exemptions

The SEC’s announcement of new crypto reporting exemptions came amidst a backdrop of ongoing Congressional pressure to revise SAB 121.

On May 16, the US Senate voted to overturn the accounting bulletin. While the resolution, HJ Res. 109, received support from a majority of Senators (60 in favor, 38 opposed), the effort ultimately fell short.

President Joe Biden vetoed the resolution a few weeks later, defending SAB 121 as a reflection of the “considered technical” judgment of SEC staff.

He argued that overturning the bulletin would undermine the regulator’s ability to effectively address emerging challenges and risks within the evolving cryptocurrency market.

On July 11, the House of Representatives attempted to override the President’s veto, but fell short of the required two-thirds majority, with a vote of 228 in support, 184 against, and 21 abstentions.

That same day, however, the SEC announced its new exemptions for crypto reporting by banks and brokerages.

This unexpected move raised questions about whether the SEC might be adjusting its approach in response to the sustained pressure from lawmakers who favor a more flexible regulatory framework for the crypto industry.

Whoa. Is this the @SECGov realizing it needs to relax SAB 121 requirements when it comes to banks and brokerages?

Reaction to Congress’s campaign for change?

SEC Allows Some Exceptions to Crypto Accounting Compliancehttps://t.co/em3rkGyjjN via @Aiacone

— Eleanor Terrett (@EleanorTerrett) July 12, 2024

Fox journalist Eleanor Terrett, for instance, has speculated that the exemptions could be a direct result of lobbying efforts by Congress, which has been actively advocating for adjustments to crypto regulations.

The post SEC Relaxes Crypto Reporting Rules for Banks and Brokerages appeared first on Cryptonews.

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Disclaimer: Information found on CryptoMediaClub is those of writers quoted. It does not represent the opinions of CryptoMediaClub on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoMediaClub covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.

© 2023 Crypto News. All Rights Reserved

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