Bipartisan Support Emerges Against SEC Guidance
The House Financial Services Committee has taken a stand against the proposed Securities and Exchange Commission (SEC) Staff Accounting Bulletin 121 (SAB 121), a regulation that has caused tension between the financial industry and the cryptocurrency community. The committee’s vote to advance a resolution disapproving of SAB 121 is a significant step towards changing the landscape of crypto asset custody in the United States.
The resolution, led by Rep. Michael Flood, challenges the SEC’s directive that requires financial institutions to include customers’ crypto assets on their balance sheets. Critics argue that this requirement burdens banks that want to engage in digital asset custody as it inflates their balance sheets and impacts their other lines of business.
“@GaryGensler is violating the SEC’s statutory mission with SAB 121. We must pass @USRepMikeFlood’s resolution so Chair Gensler’s illegal rule ceases to be in effect.” – Tom Emmer
The bill to stop the SEC from approving this controversial guidance has garnered bipartisan support within the House Financial Services Committee, with more supporters than opponents.
Impact of SAB 121 on Financial Institutions
The committee’s criticism of SAB 121 revolves around its perceived limitations on banks’ ability to custody digital assets. According to Rep. Flood, this rule forces banks to make a difficult choice: either engage in crypto asset custody at the expense of their balance sheet health or avoid the crypto market altogether. This dilemma becomes particularly pressing following the SEC’s recent approval of spot bitcoin exchange-traded funds (ETFs), which rely on non-bank custodians like Coinbase, Gemini, Fidelity, and BitGo.
The progress of the resolution through the committee is just the first step in a series of legislative hurdles. To take effect, the disapproval resolution must be ratified by both the House and Senate. The Congressional Review Act (CRA) provides the legal basis for this action, allowing Congress to nullify recently enacted regulatory rules.
Moreover, a ruling in favor of the CRA will prevent the SEC from implementing similar orders in the future, setting a precedent for the Commission’s actions.
Enhanced Resources for Crypto Crime Investigation
In addition to the resolution against SAB 121, the committee has passed a bill aimed at strengthening the investigative powers of the U.S. Secret Service in relation to crypto-related crimes. The Combating Money Laundering in Cyber Crime Act reflects growing concerns about cryptocurrencies being used for illegal transactions.
The bill provides the Secret Service with enhanced resources to bolster the United States’ defense against cyber crimes involving cryptocurrencies. This measure aims to protect consumers and maintain the integrity of the financial system.
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Hot Take: A Significant Step Forward
The House Financial Services Committee’s vote to advance a resolution disapproving of SEC Staff Accounting Bulletin 121 marks a significant milestone in altering the landscape of crypto asset custody in the United States. With bipartisan support, this resolution challenges the SEC’s directive that burdens financial institutions with including customers’ crypto assets on their balance sheets.
If ratified by both the House and Senate, this disapproval resolution would prevent similar orders from being implemented by the SEC in the future, serving as a precedent for Commission actions. Additionally, alongside this resolution, efforts are being made to strengthen resources for investigating crypto-related crimes.
This development highlights ongoing debates and tensions surrounding cryptocurrency regulations and showcases how policymakers are grappling with striking a balance between innovation and investor protection. The outcome of these legislative efforts will undoubtedly shape the future of crypto asset custody and regulation in the United States.
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