A collective of US Congress members has issued a memorandum, urging significant financial authorities to either take definitive action or offer explicit guidance regarding the recent findings of the US Securities and Exchange Commission (SEC), particularly focusing on the Staff Accounting Bulletin 121 (SAB 121 ). The memorandum is specifically directed towards pivotal figures such as the Chairman of the Federal Deposit Insurance Board and the Acting Comptroller of the Currency.
In their addressed memorandum, these lawmakers stress the non-binding nature of SAB 121 and emphasize that federal banking agencies and the National Credit Union Administration should not enforce compliance among banks, credit unions, and other financial institutions providing custody services for digital assets.
SAB 121 mandates that crypto assets held by bank customers must be reflected on the bank's balance sheet, accounting for their value, and requires corresponding capital reserves against these assets. However, numerous industry representatives and several US lawmakers argue that this directive undermines regulated banks' willingness to function as custodians of cryptocurrencies, treating digital assets differently compared to other asset types.
Prompted by a letter from Senator Cynthia Lummis to the US Comptroller General in August 2022, the Government Accountability Office (GAO) determined that the SEC's SAB 121 warrants congressional review. This review aims to evaluate whether the announcement aligns with the regulations set forth by the Congressional Review Act. This act mandates that agency rules must be reported to the comptroller general and Congress, providing Congress with the potential authority to veto these rules.
The concerned legislators, including Senators Cynthia Lummis and Kirsten Gillibrand, and Representatives Patrick McHenry, French Hill, Rich Torres, Mike Flood, and Willie Nickell, have expressed concerns that enforcing this inconsistent rule could set a disconcerting precedent. They fear that such practices might allow regulatory maneuvers to bypass the Administrative Procedure Act, thereby granting the SEC regulatory power over agencies without congressional authorization.
In June 2022, a group of five senators conveyed their dissatisfaction with what they perceived as "backdoor regulation" in a letter addressed to SEC Chairman Gary Gensler. Furthermore, Mike Flood raised apprehensions about this announcement during his appearance before the House Financial Services Committee and directly engaged with Chairman Gensler during a subsequent hearing in September.
