US Lawmakers Push for Repeal of SEC's Crypto Guidelines under SAB 121
Summary:
A group of U.S. lawmakers wants to repeal the Staff Accounting Bulletin 121 (SAB 121) by the U.S. Securities and Exchange Commission, which mandates banks to include client's cryptocurrency assets in their balance sheets. They argue this stifles banks' willingness to become crypto custodians and unfairly distinguishes crypto assets from other investments. The lawmakers are championing for official disapproval of SAB 121 under the Congressional Review Act and have also requested key financial regulators to clarify that SAB 121 is not legally binding.
A group of U.S. lawmakers are intent on repealing the Staff Accounting Bulletin 121 (SAB 121) issued by the U.S. Securities and Exchange Commission (SEC). This mandate imposes restrictions on banks interested in managing their clients' cryptocurrency assets, insisting they include these investments in their balance sheets. On February 1, 2023, Representatives Mike Flood, Wiley Nickel, and Senator Cynthia Lummis introduced a resolution under the Congressional Review Act to officially disapprove of SAB 121, stating it carries no legal weight.
Under SAB 121, it is stipulated that crypto assets belonging to a bank's clients must be incorporated in the bank's balance sheet, reflecting the asset values and necessitating the maintenance of a corresponding capital reserve. Lawmakers have expressed concerns that this approach calls into question the willingness of regulated banks to serve as crypto custodians and unfairly distinguishes crypto assets from others.
In November 2023, numerous U.S. Congress members submitted a memorandum appealing to key financial regulators, such as the chair of the Federal Deposit Insurance Commission, to clarify that SEC SAB 121 is not legally binding, following a ruling by the Government Accountability Office (GAO).
The GAO agreed that congressional review of SEC’s SAB 121 was justified after receiving a letter from Senator Lummis to the U.S. Comptroller General in August 2022. The evaluation was focused on whether the bulletin fits the definition of a rule as per the Congressional Review Act.
Senator Lummis articulated her concern relating to how the SEC’s SAB 121 could potentially impact consumer protection and prevent regulated financial institutions from securely managing the financial assets of American citizens. Congressman Flood, supporting Senator Lummis' sentiments, chastised the SEC for implementing SAB 121 without first consulting with prudential regulators or undergoing the necessary notice-and-comment procedure. He underscored that it is crucial for Congress to provide a balance in the event of overreach by any regulatory body.
Published At
2/2/2024 3:32:23 PM
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