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ARTICLE · 09 NOVEMBER 2023

SEC's Crypto Accounting Bulletin Determined Procedurally Deficient

Fenwick
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On October 31, 2023, the U.S. Government Accountability Office (GAO) published a formal decision concluding that the Securities and Exchange Commission (SEC) failed to follow prescribed Congressional...

United StatesTechnology
Ryan J. Straus
Ryan J. Straus
Ran Ben-Tzur
Ran Ben-Tzur
Jennifer J. Hitchcock
Jennifer J. Hitchcock
Kevin S. Kirby
Kevin S. Kirby
Hector Velez
Hector Velez
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On October 31, 2023, the U.S. Government Accountability Office (GAO) published a formal decision concluding that the Securities and Exchange Commission (SEC) failed to follow prescribed Congressional Review Act (CRA) procedures in its 2022 issuance of Staff Accounting Bulletin No. 121 (SAB 121).

As described in more detail in Fenwick's client alert from April 2022, SAB 121 provides that a company subject to SEC filing or reporting obligations that safeguards crypto assets for its users should record a liability and corresponding asset on its balance sheet, reflecting the value of the assets. The bulletin has been the subject of significant controversy, with some lawmakers arguing SAB 121 upsets the long-standing convention of treating property held in custody as "off-balance sheet," and in doing so discourages well-regulated banks and other financial institutions from providing crypto asset custodial services because of the strain on their capital requirements

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