The U.S. Government Accountability Office (GAO) submitted a decision on the U.S. Securities and Exchange Commission’s (SEC) guidance published in March 2022, ruling that the securities regulator was in the wrong when it issued the Staff Accounting Bulletin 121.

In a view published on Tuesday, the GAO said that the SEC should have submitted the bulletin to both the House of Representatives and the Senate as well as the Comptroller General. 

For context, the Staff Accounting Bulletin 121, which became effective in April last year, was guidance published by the SEC that required firm’s that safeguarded crypto assets for customers on its balance sheet, to maintain capital against these assets. 

Market participants and some lawmakers argued that the controversial guidance dissuaded regulated financial institutions and banks from engaging in crypto custody services. 

“We find that the bulletin does meet the definition of a rule under the Administrative Procedure Act and that no exception applies,” read the GAO’s report.

“Thus, the bulletin is subject to the Congressional Review Act’s submission requirement.”

Although the GAO’s view does not change the standing of the Staff Accounting Bulletin 121, the crypto community welcomed the development as a win for the industry.

“The SEC should immediately withdraw SAB 121. If it does not, the GAO’s analysis makes a slam dunk out of a lawsuit against the SEC alleging a violation of the APA’s notice-and-comment requirement,” said Jake Chervinsk, chief policy officer at the Blockchain Association.