Key Takeaways
- Members from both political parties in the HSFC supported the resolution, while 20 members opposed it.
- Rep. Mike Flood (R-Neb.), stated that banks consider custodial assets, including securities, as “off-balance sheet” items.
The U.S. House Financial Services Committee took a significant step by voting in favor of a resolution aimed at scrapping the Securities and Exchange Commission’s Staff Accounting Bulletin 121 (SAB 121). This resolution, known as H.J. Res. 109, seeks to overturn a policy outlined in SAB 121, which requires SEC registrants to record an obligation to safeguard cryptoassets they hold at their fair value.
During a markup hearing on Feb. 29, a majority of committee members, comprising representatives from both sides of the political spectrum, voted in favor of the resolution. However, 20 members opposed the resolution. The House Financial Services Committee highlighted that eliminating SAB 121 would remove barriers preventing regulated banks from serving as custodians of digital assets, thus enhancing consumer protection.
Republican Congressman Mike Flood, the resolution’s proponent, criticized SAB 121, arguing that it unfairly impedes banks interested in custodying cryptoassets. Flood pointed out that custodial assets, including securities and digital assets like Bitcoin, are typically considered “off-balance sheet” items for banks. He expressed concern that requiring banks to hold these assets on-balance sheet would significantly impact their regulatory obligations, such as capital and liquidity requirements.
Flood emphasized that the current guidance effectively prevents banks from custodying digital assets, presenting them with an unfavorable choice between inflating their balance sheet or abstaining from the market entirely. The resolution, co-introduced by Rep. Wiley Nickel (D-N.C.), seeks to repeal SAB 121, providing banks with more flexibility in their approach to digital asset custody.
The measure advanced in the House with a vote of 31-20, but it still requires approval in the full House and Senate before SAB 121 can be discarded. Senator Cynthia Lummis (R-Wyo.) has introduced a companion measure in the Senate, indicating broader legislative interest in addressing the implications of SAB 121.
The resolution’s advancement follows an October statement from the Government Accountability Office, signaling that by law, SAB 121 must undergo congressional review before taking effect. Despite the committee’s vote, the resolution’s fate hinges on further legislative procedures, including floor votes in both chambers of Congress.
