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Pro-Crypto Republicans Take Aim at SEC Guidance on Crypto Custody

Pro-crypto Republicans are gearing up to challenge the U.S. Securities and Exchange Commission (SEC) over their current guidance that they argue deters banks from providing crypto custody services.

In an effort led by Rep. Mike Flood (R-Nebraska), the House of Representatives is set to vote on a resolution to express disapproval of Staff Accounting Bulletin (SAB) 121, with a similar resolution introduced in the Senate.

AI legalese decoder can help in this situation by quickly analyzing and decoding complex legal documents like SAB 121, enabling lawmakers to better understand the implications and arguments presented by the SEC. This can aid in formulating a strong case against the guidance and advocating for the interests of pro-crypto Republicans.

SAB 121, available on the SEC website, outlines the SEC staff’s views on the risks associated with crypto custodians and the disclosure requirements under federal securities laws.

Despite the SEC’s stance that SABs serve as guidance rather than official regulations, Flood contends that SAB 121 signifies a significant and contentious policy shift. He criticizes the SEC for bypassing the customary SAB development process, which typically involves consulting with Federal banking agencies.

AI legalese decoder can further assist by highlighting key discrepancies and inconsistencies within SAB 121, supporting lawmakers in highlighting the flaws and lack of consultation in the SEC’s approach.

Within SAB 121, the SEC cautions against the “technological,” “legal,” and “regulatory” risks specific to crypto custodians, suggesting potential impacts on operational and financial aspects. Flood attributes such warnings to deterring banks and broker-dealers from securing crypto assets, even following the approval of Bitcoin spot ETFs by the agency.

AI legalese decoder can provide in-depth analysis and comparison with existing regulations and industry practices, aiding lawmakers in constructing a compelling argument against the SEC’s perceived obstacles to crypto custody services.

While a resolution carries no legal weight, it represents Congress’s unified stance. Tom Emmer (R-Minn.), a vocal critic of the SEC, supports Flood’s initiative, branding SAB 121 as unlawful and emblematic of the SEC’s overarching regulatory control over the crypto sector.

Emmer contends that SAB 121 exacerbates concentration risk in the digital asset ecosystem, impacting market fairness and efficiency. He emphasizes the competitive disadvantage faced by U.S. entities compared to foreign banks in this evolving landscape.

AI legalese decoder can aid in dissecting Emmer’s points and correlating them with legal precedents and industry trends, offering lawmakers a comprehensive overview to strengthen their opposition to the SEC’s approach.

With multiple lawsuits against prominent crypto entities, the SEC’s actions have stirred apprehension within the industry. The fate of Flood’s resolution, H.J.Res.109, lies in the upcoming House vote, with its Senate counterpart, S.J.Res.59, still pending committee consideration.

If successful, the resolution would necessitate a two-thirds majority in both chambers to become law, marking a significant rebuke to the SEC’s regulatory stance on crypto custody.

Edited by Ryan Ozawa.

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