- The US House of Representatives has passed a resolution rejecting the SEC’s crypto accounting guidance SAB 121
- The resolution aimed to make it easier for banks to custody cryptocurrencies for clients
- President Biden has promised to veto the resolution, emphasizing the importance of protecting consumers from risks.
The US House of Representatives has passed a resolution opposing the Securities and Exchange Commission’s (SEC) cryptocurrency accounting guidance on the ownership of cryptocurrencies. Staff Accounting Bulletin No. 121 (SAB 121) was designed to clarify accounting treatment for digital assets, deterring banks from managing crypto for customers. President Joe Biden, however, has promised to veto the resolution if it reaches his desk, sparking rebukes from proponents of the resolution.
Gensler Accused of Freezing Banks out of Crypto
SAB 121 requires banks holding customers’ digital assets to list them on their balance sheets, potentially leading to significant capital expenses, leading to the creation of SAB 121 to circumvent this. The bulletin has drawn heavy criticism from digital asset businesses and Republican lawmakers, with Representative Mike Flood, who sponsored the resolution, accusing SEC Chair Gary Gensler of using “mundane staff accounting guidance to essentially freeze out large publicly traded banks from taking custody of digital assets.”
Patrick McHenry, Chair of the House Financial Services Committee, added that the policy marked a significant departure from traditional banking regulations, calling SAB 121 “a massive deviation for how highly regulated banks are traditionally required to treat assets on behalf of their customers.” The SEC did not consult with banking regulators before implementing the policy, leading to bipartisan support for the resolution.
Biden Administration Could Kill Effort
Despite bipartisan backing in the House, key Democrats like Rep. Maxine Waters opposed the measure, arguing that it goes too far and could restrict the SEC’s ability to regulate the crypto market effectively. She criticized the resolution for using “a sledgehammer to fix an issue that may merely need a scalpel.”
The Biden administration echoed these concerns, emphasizing that SAB 121 was intended to address substantial technological, legal, and regulatory risks that had resulted in significant consumer losses. In a statement, the White House argued that invalidating SAB 121 through the Congressional Review Act would constrain the SEC’s capacity to regulate crypto-assets and safeguard the broader financial system, potentially leading to instability and market uncertainty.
Despite this opposition, Flood remains undeterred, stating that he and his allies will “look for every single vehicle” to bring the resolution to Biden’s desk. The joint resolution also has a matching Senate counterpart, sponsored by the pro-crypto senator Cynthia Lummis. However, any reversal under the Congressional Review Act would not only erase the rule but also prevent the SEC from reintroducing anything similar in the future.
