The U.S. House Financial Services Committee (HSFC) has taken a significant step by voting in favor of a resolution aimed at overturning guidance from the U.S. Securities and Exchange Commission (SEC) that restricts banks from engaging in cryptocurrency custody services. During the February 29 hearing, a majority of 31 HSFC members, representing diverse political affiliations, supported the resolution, while 20 members opposed it.
The resolution seeks to nullify Staff Accounting Bulletin No. 121 (SAB 121), introduced by the SEC in March 2022. This guidance mandates institutions holding cryptocurrency assets in custody to record them as liabilities on their balance sheets. The HSFC views overturning SAB 121 as a measure to protect consumers by eliminating barriers preventing heavily regulated banks from offering custodial services for digital assets.
Republican Congressman Mike Flood, the sponsor of the resolution, argued that SAB 121 unfairly burdens banks intending to provide cryptocurrency custody services. Flood emphasized that such custody assets, including digital assets like Bitcoin, have traditionally been treated as off-balance sheet items, and enforcing SAB 121 could have significant repercussions on banks' regulatory obligations, such as capital and liquidity requirements.
The resolution, co-sponsored by Democratic Rep. Wiley Nickel, criticizes SAB 121 for overstepping its bounds as an accounting guideline and effectively assuming the role of de facto legislation. However, before SAB 121 can be repealed, the resolution must pass through full House and Senate votes, highlighting the ongoing legislative process surrounding cryptocurrency regulation.
During the markup hearing, Republican Congressman Tom Emmer condemned SAB 121 as an "illegal" manifestation of SEC Chair Gary Gensler's bias against the digital asset ecosystem. Emmer raised concerns about the concentration of risk introduced by SAB 121 and its adverse effects on areas like Bitcoin exchange-traded funds (ETFs). Conversely, Democratic Congresswoman Maxine Waters, among the lawmakers opposing the resolution, characterized the attempt to repeal SAB 121 as a setback, particularly from a cryptocurrency-friendly perspective, arguing that it impedes SEC transparency efforts in the crypto domain.
