House Financial Services Committee Approves Resolution to Reverse SEC’s SAB 121
The House Financial Services Committee has voted in favor of a resolution that seeks to overturn the United States Securities and Exchange Commission’s (SEC) controversial digital asset accounting bulletin, SAB 121. The resolution, brought forward by representatives Mike Flood (R-NE) and Wiley Nickel (D-NC), aims to reverse the bulletin, which would require banks to include custodial cryptocurrencies on their balance sheets. The committee members hope that by passing this resolution, they can prevent banks from being limited in their participation in the digital asset ecosystem.
SAB 121 Presents Serious Ramifications for the Banking Sector
Congressman Flood expressed his strong disapproval of SAB 121, arguing that it would have significant consequences for the banking industry as a whole. He highlighted the following concerns:
- The requirement for banks to hold digital assets on their balance sheets would affect their other regulatory obligations such as capital and liquidity requirements.
- Complying with SAB 121 would force banks to choose between custodying digital assets and inflating their balance sheets or staying out of the market altogether.
Banks Eager to Serve as Custodians for Spot Bitcoin ETFs
Congressman Flood also raised another issue related to SAB 121. He pointed out that banks are currently prohibited from serving as custodians for spot Bitcoin exchange-traded funds (ETFs) under the bulletin. He argued that allowing banks to become custodians for these ETFs would be beneficial because:
- There are currently only four non-bank custodians for eleven Bitcoin ETFs.
- Banks have expertise in custody services and are well-regulated.
However, not everyone at the committee meeting supported Flood and Nickel’s resolution. Congresswoman Maxine Waters (D-CA) expressed her disagreement with the committee’s criticism of SAB 121. She argued that the bulletin is non-binding SEC staff guidance intended to provide clarity on accounting for customers’ cryptocurrencies. Waters stated that the resolution would effectively block the SEC staff from providing that clarity.
Resolution to Overturn SAB 121 Progresses
The committee’s vote on the resolution comes after a trade group coalition representing major U.S. banks called on SEC Chair Gary Gensler to revise the staff accounting bulletin. The coalition raised concerns about the impact of SAB 121 on the safety and stability of the banking ecosystem. With the committee’s approval, the resolution will now proceed to a full vote on the floor of the House of Representatives.
Hot Take: Potential Reversal of SEC’s Digital Asset Accounting Bulletin Receives Committee Approval
The House Financial Services Committee has given its support to a resolution seeking to reverse the SEC’s controversial digital asset accounting bulletin, SAB 121. The resolution, introduced by representatives Mike Flood and Wiley Nickel, aims to address concerns about the potential negative consequences of requiring banks to include custodial cryptocurrencies on their balance sheets. While some members of the committee expressed disagreement with the resolution, citing its impact on clarity around crypto accounting, others believe it is necessary to prevent limitations on banks’ participation in the digital asset ecosystem. The resolution will now move forward for a full vote in the House of Representatives.
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