With the SEC’s (Security and Exchange Commission) new accounting rule, SAB 121, democrats and republicans both are pursuing a fervent effort to protect the interests of the crypto industry and to prevent custodial regulations that may make the holding of crypto burdensome for traditional financial institutions offering them in the form of ETFs. Proponents of the rule as well as its opposition are at odds in a legislative quarrel over the regulation seeking to ensure the solvency of traditional institutions offering the new crypto funds to the public.

Overturning SAB 121 has become a lightning rod, uniting crypto shops, major banks, and policymakers on both sides of the aisle. The impetus behind H.J. 109, a House Joint Resolution from last year, was the looming detriment perceived by crypto enthusiasts and banks alike which would see capital requirements being higher because of SAB 121’s accounting requirement that would mandate banks to record the crypto instruments as liabilities. A bill that was vetoed by President Biden.

However, a different bill that seeks to do the same thing, H.R. 5741, is sponsored by Mike Flood (R-NE) with 14 Democrats and 6 Republicans cosponsoring.

Economists have pointed out the necessity of scrutinizing excessively speculative markets with a fine toothed comb, but there is much wonderment and awe at the fact that little has been done to close the CFTC’s (Commodities Futures Trade Commission) loophole which allows foreign swaps to avoid Dodd Frank. A major source of inflation in the United States and abroad. The Trump rollbacks of which, in terms of stress test requirements, leave much to be desired as far as consumer protection.

The hedge funds with bitcoin or bitcoin ETF exposure include Mariner Investment Group, Millennium Management, D.E. Shaw, Point72 Asset Management, Verition Fund Management, BlueCrest Capital Management, Elliot Investment Management, and Sculptor Capital Management. Actually, more than 50% of top U.S. hedge funds are offering crypto ETFs.

With this in mind and in addition to private equity firms like BlackRock and bigger investment managing firms such as Ark and Fidelity offering the new crypto ETFs, the SEC is interested in ensuring economic stability and to stave off future disasters. Perhaps it will also look into other holes in the dam in the future. For the time being and the foreseeable future this specific topic will be a contentious one that will hopefully see a sane and equitable endpoint.