The House Financial Services Committee of the U.S. Congress has advanced a resolution that seeks to disavow SEC SAB 121, a bulletin that leaves banks and financial institutions out of the cryptocurrency custody provider market. However, the resolution, advanced with bipartisan support, is unlikely to be passed at a vote on the House floor, according to Variant CLO Jake Chervinsky.
House Financial Services Committee Advances Bill to Repeal SEC Bulletin Preventing Banks From Offering Crypto Custody Services
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House Financial Services Committee Advances Resolution to Repeal SEC SAB 121
Part of the U.S. Congress is moving to repeal the protections that the U.S. Securities and Exchange Commission (SEC) has established to keep banks out of the crypto custody market in the U.S. On February 29, the House Financial Services Committee advanced resolution 109, which seeks to disapprove SEC’s Staff Accounting Bulletin 121 (SAB 121).
This accounting bulletin offers guidance to institutions regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users. Rep. Mike Flood (R-NE), who submitted the bill with Rep. Wiley Nickel (D-NC), accused the U.S. SEC of overreaching, stating that SAB 121 “virtually locked out the most regulated institutions from serving as custodians for digital assets.” Flood also explained that all companies providing custody services for bitcoin ETF purposes were not banks due to this policy.
SAB 109, published by the SEC on April 11, 2022, establishes that any financial entity providing custody services for cryptocurrency assets “should present a liability on its balance sheet to reflect its obligation to safeguard the crypto-assets held for its platform users.” The resolution considers this a rule under the Congressional Review of Agency Rulemaking (CRA), and establishes such rule shall have “no force or effect.”
The resolution is now poised to be voted on the House floor to be passed; however, Jake Chervinsky, CLO of crypto venture capital firm Variant, explained that he believes this won’t happen. On X, he stressed it was unlikely for the “bill to (1) get a House floor vote, (2) get through the Democratic Senate, and (3) get signed by POTUS.”
Better Markets, a nonprofit that advocates for greater transparency in commodity markets, disapproved of the action, stating that SEC’s SABs were considered “highly technical and result from extensive deliberation and considered opinion of highly experienced experts.” In addition, it criticized the expertise and understanding of Congress to deal with these matters.
What do you think about the resolution that seeks to repeal SEC SAB 121? Tell us in the comments section below.
