The House Financial Services Committee recently made significant strides by passing bipartisan legislation covering various critical areas such as digital assets, housing, and national security. This comprehensive effort reflects a commitment to addressing diverse aspects of the economy and security landscape. Here’s an overview of the legislation passed:
The House Financial Services Committee voted to advance a resolution that seeks to disapprove of the Securities and Exchange Commission’s (SEC) controversial custody guidance. This resolution aims to facilitate banks in offering custody services for cryptocurrencies.
House Committee’s sweeping changes decoded
Today, the House Financial Services Committee passed five bills that will increase accountability at the Department of Housing and Urban Development (HUD), provide the Secret Service with tools to detect and deter illicit finance, and repeal the Securities and Exchange Commission’s (SEC) SAB 121 digital asset accounting guidance under the Congressional Review Act (CRA).
The statement reads:
H.J.Res.109, providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to “Staff Accounting Bulletin No. 121,” offered by Rep. Mike Flood (NE-01), overturns the SEC’s SAB 121.
By overturning SAB 121, the Resolution will ensure consumers are protected by removing roadblocks that prevent highly regulated banks from acting as custodians of digital assets.
House Financial Services Committee
In a Feb. 29 markup hearing, 31 HSFC members from both political parties voted in support of the resolution, while 20 voted against it.
The SEC’s Staff Accounting Bulletin No. 121, issued in March 2022, is a set of guidelines that compels institutions that hold crypto assets to record them as liabilities on their balance sheets.
In the House Committee, Republican congressman Mike Flood, who submitted the resolution, claimed that SAB 121 was unfair to banks seeking to hold crypto because custodial assets are “always considered off-balance sheet,” which includes securities and digital assets such as Bitcoin.
The ramifications of requiring banks to hold these assets on-balance sheet are pretty significant […] If a bank were to custody digital assets according to the parameters of SAB 121, the on-balance sheet treatment would affect their other regulatory obligations like their capital and liquidity requirements.
Mike Flood
The effects of the bulletin on the crypto industry
SAB 121, according to the resolution, which was introduced by Flood and Democrat representative Wiley Nickel on February 1, had moved “beyond the scope of an accounting bulletin” and had become de facto legislation.
Notably, before SAB 121 is thrown out, the resolution must still pass a complete floor vote in both the House and the Senate.
Republican Congressman Tom Emmer, who is favorable to cryptocurrencies, stated during the markup hearing that SAB 121 exemplified SEC Chairman Gary Gensler’s “unrelenting prejudice towards the digital asset ecosystem” in a “illegal” manner.
According to Emmer, SAB 121 put the crypto ecosystem at “unnecessary and avoidable” concentration risk.
Conversely, one of the lawmakers who voted against the resolution, Democratic Congresswoman Maxine Waters, described the rescinding of SAB 121 as an “ironic” action by pro-cryptocurrency politicians.
And in this Committee, we are also going to consider a resolution that will put our economy at risk by gutting the SEC’s ability to protect investors and clear up confusion for industry. This resolution would rescind SEC’s Staff Accounting Bulletin 121, or S-A-B 121.
This bulletin is non-binding SEC staff guidance intended to help clarify how a company should account for its customers’ cryptocurrencies. We often hear Republicans and the crypto industry complain about a lack of clarity from the SEC, but ironically, the resolution before us effectively blocks the SEC staff from providing that clarity around crypto.
Congresswoman Maxine Waters
The SEC’s Staff Accounting Bulletin (SAB) is a series of interpretive publications issued by the staff of the U.S. Securities and Exchange Commission (SEC). SABs summarize the views of the SEC staff on various accounting and disclosure issues, providing guidance on how Generally Accepted Accounting Principles (GAAP) should be applied.
They cover topics such as financial statements, business combinations, and specific accounting practices like safeguarding crypto-assets. These bulletins offer clarity and consistency in financial reporting and help ensure compliance with regulatory requirements.
