Key Points
- The House Financial Services Committee (HSFC) is seeking to nullify an SEC guideline that hinders banks’ participation in cryptocurrency custody services.
- Both political parties support the resolution, which aims to repeal Staff Accounting Bulletin No. 121 (SAB 121).
The HSFC recently voted on a resolution aimed at removing an SEC guideline that has been obstructing banks’ ability to offer cryptocurrency custody services.
During a markup hearing held at the end of February, the resolution received backing from both political parties, with a majority of 31 members voting in favour and 20 against.
Effects of SAB 121
SAB 121, introduced in March 2022, requires institutions holding cryptocurrency assets to classify these holdings as liabilities on their balance sheets.
The HSFC believes that repealing SAB 121 would remove barriers preventing regulated banks from acting as custodians for digital assets, thus improving consumer protection.
The resolution was introduced by Republican Congressman Mike Flood and Democrat Representative Wiley Nickel, who criticized SAB 121 for its unfair treatment of banks interested in crypto custody.
Controversy Surrounding SAB 121
The resolution argues that SAB 121 exceeds the usual scope of an accounting bulletin, effectively functioning as a law. It now awaits approval from a full floor vote in both the House and the Senate before SAB 121 can be repealed.
Crypto-friendly Republican Congressman Tom Emmer described SAB 121 as an unlawful embodiment of SEC Chair Gary Gensler’s bias against the digital asset ecosystem. Emmer highlighted the introduction of unnecessary risks, such as the lack of banks offering custodial services for approved Bitcoin ETFs.
However, Democrat Congresswoman Maxine Waters, who opposed the resolution, found it ironic that the crypto industry and Republicans are calling for clearer guidelines from the SEC, while simultaneously trying to revoke SAB 121.
Despite the controversy, Staff Accounting Bulletins like SAB 121 are not enforceable laws but serve as non-binding guidelines to help companies account for customer crypto holdings. These guidelines do not undergo public notice or comment periods, which are typical for more formal rules.
In a related development, SEC Commissioner Hester Pierce, also known as ‘Crypto Mom,’ advocated for increased decentralization in the U.S. financial system and a more lenient approach towards crypto regulation and enforcement at the ETHDenver conference.
Pierce argued that decentralization could enhance the resilience and strength of the financial system by reducing concentration risks.
