The Biden administration has made it clear that they intend to veto H.J. Res. 109, which seeks to overturn the SEC’s Staff Accounting Bulletin 121 (SAB 121). They argue that this change would hinder the SEC’s efforts to protect crypto market investors and maintain the stability of the financial system. The administration believes that SAB 121 was issued in response to demonstrated risks and reflects the considered views of SEC staff. They see the invocation of the Congressional Review Act as an inappropriate way to regulate the SEC’s ability to address crypto issues and create necessary guardrails.
Chairman Patrick McHenry of the House Financial Services Committee has voiced his support for the resolution to overturn SAB 121. He criticizes the SEC for overreaching its authority under Chair Gary Gensler and bypassing the required public comment and rulemaking process. McHenry argues that SAB 121 imposes unnecessary costs on banks that offer custody services for customer crypto, potentially putting user assets at risk. Representative Tom Emmer and Congressman Mike Flood have also backed the resolution.
Even within the banking industry, there has been pushback against SAB 121. The American Bankers Association (ABA) has raised concerns about the policy, stating that it presents challenges for banks acting as custodians for spot Bitcoin ETFs. They believe that the reserve and capital requirements outlined in SAB 121 make it difficult for banks to fulfill their custodial duties. Additionally, the ABA argues that the bulletin does not differentiate between cryptos on public ledgers and traditional assets on permissioned ledgers.
Despite their objections to certain aspects of SAB 121, the ABA has not called for the complete overturning of the policy. Instead, they have urged the SEC to make modifications to address the challenges faced by financial institutions. By working with industry stakeholders, the ABA hopes to find a balanced approach that meets regulatory requirements while also allowing banks to continue offering custodial services for customer crypto assets.
The debate surrounding the SEC’s Staff Accounting Bulletin 121 highlights the complexities and challenges of regulating the crypto market. While there are valid concerns about the impact of SAB 121 on banks and investors, it is clear that there is a need for careful consideration and collaboration between regulatory agencies and industry stakeholders to find a solution that protects consumers while also fostering innovation in the cryptocurrency space.
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