The U.S. House of Representatives voted to pass a measure that would overturn the U.S. Securities and Exchange Commission’s (SEC) controversial Staff Accounting Bulletin (SAB) 121, which would require crypto custodians to hold customer’s crypto assets as liabilities on their own balance sheets.
The vote ended 228-182, with the majority of votes cast by Republicans, in favor of the measure to overturn the bulletin. The resolution was set in motion by Sen. Cynthia Lummis (R-Wyo.), Rep. Mike Flood (R-Neb.), and Wiley Nickel (D-N.C.) in February.
By disincentivizing well-regulated financial institutions from providing custody services for digital assets, the @SECGov's SAB 121 concentrates this risk in less regulated firms.
Republicans' CRA blocks SAB 121—enhancing consumer protections in digital asset markets. pic.twitter.com/2M5FH4bDC2
— Financial Services GOP (@FinancialCmte) May 8, 2024
The House Financial Services Committee Chair Patrick McHenry called SAB 121 “one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC.”
SAB 121 was introduced in April 2022 and stipulated that any firm looking to custody crypto on behalf of clients would only be able to do so if they held customers’ crypto assets on their own balance sheet as a liability and maintain enough capital to reflect the value of those assets.
McHenry noted that under these terms, banks would be required to take on significant capital and liquidity costs, making it prohibitive for them to custody their clients’ digital assets.
It set a disturbing precedent and is not the appropriate vehicle to promulgate accounting guidance for digital asset custodians. I appreciate the broad support of my colleagues in the House for H.J. Res. 109 and urge the Senate to take action to deliver a full repeal of SAB 121.
— Rep. Mike Flood (@USRepMikeFlood) May 8, 2024
Notably, among those opposing the measure was the committee’s leading Democrat, Maxine Waters, who argued that the bill “takes a sledgehammer to fix an issue that may nearly need a scalpel.”
A statement from the White House emphasized that the President would veto the bill, noting that the administration strongly opposes the proposed resolution.
“By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets including financial stability,” said the statement from the White House.
