In a significant move, the U.S. House of Representatives has voted to nullify the contentious Securities and Exchange Commission (SEC) guidance, which had been impeding banks from engaging in crypto asset custody services.
President Joe Biden, however, voiced his intention to veto the newly passed bill, should it reach his desk.
On May 8, in a bipartisan effort, the House approved H.J. Res 109, effectively overturning the SEC’s Special Accounting Bulletin 121 (SAB 121). This bulletin had mandated banks to include their customers’ crypto assets on their balance sheets, a requirement not applicable to traditional securities.
“Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty.”
Source : the White House
Republican Representative Mike Flood, the bill’s initiator, criticized SAB 121 as unjust to banks seeking to offer crypto custody services, citing the conventional treatment of custodial assets as off-balance sheet items.
Significantly, 21 Democratic members joined their Republican counterparts in supporting the bill, leading to a 228-182 vote in favor.
In response, the White House expressed strong opposition to the House’s action, contending that overturning SAB 121 would disrupt the SEC’s efforts to safeguard investors in the crypto asset market and the broader financial system.
SAB 121, introduced by the SEC in March 2022, delineated accounting standards for institutions handling crypto assets, effectively deterring banks from offering custodial services.
Critics, including U.S. lawmakers and SEC Commissioner Hester Peirce, have argued that SAB 121 undermines the willingness of regulated banks to serve as crypto custodians and unfairly treats crypto holdings differently from traditional assets.
The House Financial Services Committee (HFSC) hailed the bipartisan resolution, asserting that its passage would remove barriers preventing highly regulated financial institutions from offering digital asset custodianship, thereby enhancing consumer protection.
HFSC Chairman Representative Patrick McHenry criticized SAB 121 as emblematic of regulatory overreach during Gary Gensler’s tenure at the SEC.
