US House Committee takes action to reverse SEC regulation restricting bank custody of cryptocurrencies
The House Financial Services Committee (HSFC) recently voted on a resolution that seeks to invalidate a guideline from the United States Securities and Exchange Commission (SEC), which has hindered banks from offering cryptocurrency custody services.
During a meeting held on February 29, the resolution garnered support from both sides of the political spectrum, with 31 members voting in favor and 20 against.
The resolution focuses on the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), which was introduced in March 2022. This guideline requires institutions holding cryptocurrency assets to list them as liabilities on their balance sheets.
According to the HSFC, repealing SAB 121 would remove barriers preventing regulated banks from acting as custodians for digital assets, thus improving consumer protection.
Republican Congressman Mike Flood, who co-sponsored the resolution with Democrat Representative Wiley Nickel on February 1, criticized SAB 121 for treating banks interested in crypto custody unfairly. Flood emphasized the significant impact of including these assets on banks’ balance sheets, which affects their regulatory obligations regarding capital and liquidity requirements.
The resolution argues that SAB 121 goes beyond the typical scope of an accounting bulletin, effectively acting as a law. It now needs to be approved by a full floor vote in both the House and the Senate before SAB 121 can be overturned.
Tom Emmer, a crypto-friendly Republican Congressman, described SAB 121 as an illegal expression of SEC Chair Gary Gensler’s bias against the digital asset ecosystem. Emmer pointed out the introduction of unnecessary risks, such as the absence of banks providing custodial services for approved Bitcoin ETFs, which he deemed risky.
On the other hand, Democrat Congresswoman Maxine Waters, who opposed the resolution, called the effort to revoke SAB 121 ironic, considering the frequent calls from Republicans and the crypto industry for clearer guidelines from the SEC. Waters emphasized that the resolution would paradoxically hinder the SEC staff from providing much-needed clarity on cryptocurrency regulations.
Staff Accounting Bulletins, like SAB 121, are not enforceable laws but serve as non-binding guidelines to assist companies in accounting for customer crypto holdings. These guidelines do not go through public notice or comment periods, which is typical for more formal rules.
In other news, SEC Commissioner Hester Pierce, also known as ‘Crypto Mom,’ advocated for increased decentralization in the U.S. financial system and a more lenient approach to crypto regulation and enforcement.
Speaking at the ETHDenver conference on February 29, Pierce argued that decentralization could enhance the resilience and strength of the financial system by reducing concentration risks.
