The House Financial Services Committee is making significant strides in advancing US Rep Mike Flood’s bill aimed at nullifying the Staff Accounting Bulletin (SAB) 121 rule, a move seen as pivotal for fostering institutional crypto adoption. This development follows concerns voiced by Senator Lummis regarding the rule’s implications, stressing the need for comprehensive feedback from federal banking regulators and the public prior to its implementation. Congressmen Flood and Wiley Nickel are leading efforts to introduce a resolution under the Congressional Review Act to assert the rule’s lack of effect, alongside advocating for the Uniform Treatment of Custodial Assets Act, aimed at exempting banks from treating custodied assets as liabilities, thus mitigating additional capital requirements for offering custody services for crypto-assets. The American Bankers Association has also raised alarms over SAB 121, warning of its potential impact on the banking industry’s ability to provide secure custody services for digital assets, garnering support from various financial institutions for legislative measures addressing these concerns.
SAB 121’s stringent requirements mandate listed companies, beyond banks, to disclose crypto-assets under custody as both assets and liabilities on the balance sheet, diverging from conventional accounting practices. This poses significant challenges for banks in meeting capital requirements, with potential implications for compliance. Critics within the banking sector have labeled SAB 121 as ‘insane,’ prompting concerns over its potential impact on institutional crypto adoption. Federal Reserve Chair Jerome Powell has acknowledged the rule’s unconventional nature during Congressional hearings, with lawmakers urging regulatory bodies to disregard its implications.