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The House Financial Services Committee cast a vote on Thursday to advance a resolution aimed at “reversing” the contentious digital asset accounting bulletin issued by the United States Securities and Exchange Commission (SEC), known as SAB 121.
This resolution, introduced by representatives Mike Flood (R-NE) and Wiley Nickel (D-NC), received majority support from committee members with the intention of nullifying the bulletin. SAB 121 mandates that banks must include custodial cryptocurrencies on their balance sheets, which effectively restricts their ability to engage in the digital asset market.
SAB 121 Imposes “Significant Consequences” For The Banking Sector
Congressman Flood voiced his concerns regarding the SEC’s bulletin, asserting that it would impose significant consequences for the banking sector overall.
.@SECGov has effectively barred the most regulated institutions from acting as custodians for digital assets. It’s time to retract SAB 121 and halt @GaryGensler’s overreach. pic.twitter.com/n3xWRhPMWq
— Rep. Mike Flood (@USRepMikeFlood) February 29, 2024
“The implications of mandating banks to maintain these assets on their balance sheets are quite substantial,” he stated. “If a bank were to hold digital assets in accordance with SAB 121, the treatment of these assets on their balance sheet would influence their other regulatory responsibilities, such as capital and liquidity requirements. Consequently, banks are faced with the choice of either holding digital assets—thereby inflating their balance sheets and significantly impacting every other aspect of their operations—or opting out of the market entirely.”
Banks Are Keen To Participate As Custodians For Spot Bitcoin ETFs
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Furthermore, Flood criticized the current restrictions preventing banks from acting as custodians for the recently SEC-approved spot Bitcoin ETFs under SAB 121.
“This is a scenario where having more bank custodians, who are well-regulated specialists in custody, would be beneficial,” Flood remarked. “Currently, there are only four custodians for those eleven Bitcoin ETFs, and they are all non-banking entities.”
However, not all attendees at the committee meeting supported Flood and Wiley’s resolution.
Congresswoman Maxine Waters (D-CA) expressed her disapproval of the committee’s critique of SAB 121.
“This bulletin serves as non-binding guidance from SEC staff designed to clarify how a company should account for its customers’ cryptocurrencies,” Waters stated. “We frequently hear Republicans and the crypto sector lament the lack of clarity from the SEC, yet paradoxically, the resolution before us effectively obstructs the SEC staff from delivering that clarity regarding crypto.”
Resolution to Overturn SAB 121 Advances
The committee’s vote follows shortly after a coalition of trade groups representing some of the largest banks in the United States urged SEC Chair Gary Gensler to amend the staff accounting bulletin, contending that it raised “critical questions about the safety and stability” of the banking system.
The resolution will now proceed to the House of Representatives for a comprehensive vote.
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