US legislators move forward with resolution to involve banks in cryptocurrency custody.

The House Financial Services Committee (HSFC) in the United States has unanimously approved a resolution to reverse a guideline from the U.S. Securities and Exchange Commission (SEC) that has prevented banks from offering crypto custody services. During a markup hearing on February 29, the resolution received support from 31 HSFC members across party lines, with 20 members voting against it. The committee stated that by overturning Staff Accounting Bulletin No. 121 (SAB 121), the resolution would remove barriers for regulated banks to act as custodians of digital assets and protect consumers. SAB 121, which was introduced in March 2022, requires institutions that custody crypto assets to record them as liabilities on their balance sheets. Republican Congressman Mike Flood, who introduced the resolution, argued that SAB 121 was unfair for banks as custodial assets are traditionally considered off-balance sheet. He also highlighted that complying with SAB 121 would impact banks’ regulatory obligations, such as capital and liquidity requirements. Flood and Democrat Representative Wiley Nickel introduced the resolution on February 1, stating that SAB 121 had exceeded its scope as an accounting bulletin and effectively functioned as a de facto law. However, the resolution still needs to pass a full floor vote in the House and the Senate before SAB 121 can be overturned. During the markup hearing, Republican Congressman Tom Emmer criticized SAB 121, describing it as an “illegal” demonstration of SEC Chair Gary Gensler’s bias against the digital asset ecosystem. Emmer argued that SAB 121 introduced unnecessary concentration risk into the crypto industry and cited the lack of custodial services provided by banks for approved Bitcoin ETFs as evidence of this risk. On the other hand, Democrat Congressperson Maxine Waters, who voted against the resolution, criticized the move to overturn SAB 121 as ironic. She argued that while Republicans and the crypto industry often complained about the SEC’s lack of clarity, the resolution would prevent the SEC staff from providing the clarity needed for cryptocurrencies. It is important to note that SABs are not legally enforceable under the SEC’s jurisdiction, but rather serve as non-binding guidelines to assist companies in accounting for customer crypto holdings.