U.S. lawmakers are pushing for the removal of Staff Accounting Bulletin 121 (SAB 121) from the U.S. Securities and Exchange Commission (SEC), a rule that restricts banks intending to hold clients' crypto assets. The resolution, introduced by Representatives Mike Flood and Wiley Nickel along with Senator Cynthia Lummis on February 1, 2023, employs the Congressional Review Act to nullify SAB 121, asserting that the rule lacks legal authority. SAB 121 mandates that banks retain customers' crypto assets on their balance sheets, requiring them to reflect the assets' value and maintain capital against those assets. Lawmakers argue that this approach hinders regulated banks from serving as custodians for cryptocurrencies and treats crypto assets differently from other types.
In November 2023, several members of Congress submitted a memorandum urging major financial institutions, including the Chairman of the FDIC Board of Directors, to provide guidance or take action to clarify the SEC's SAB 121 following its unenforceable discovery in the Government Accountability Office (GAO). The GAO, in response to Senator Lummis' letter in August 2022, concluded that a congressional review of the SEC's SAB 121 was warranted. The review will assess whether the proclamation aligns with the criteria specified in the Congressional Review Act.
Senator Lummis expressed serious concerns about the potential impact of the SEC's SAB 121 on consumer protections and its potential to dissuade well-regulated financial institutions from securely managing Americans' hard-earned financial assets. She emphasized the significance of receiving feedback from federal bank regulators and the public before implementing the legally binding order, asserting that SAB 121 has far-reaching implications. In alignment with Lummis' position, Representative Flood criticized the SEC for issuing SAB 121 without consulting prudential regulators or undergoing the necessary notice and comment process. He underscored the importance of Congress acting as a check and balance to address regulatory overreach.
