In a significant move, the United States House of Representatives has passed a bill aimed at overturning the controversial Securities and Exchange Commission (SEC) guidance that restricts banks from holding crypto assets. Known as Special Accounting Bulletin 121 (SAB 121), this guidance mandates banks to include customers’ crypto holdings on their balance sheets, unlike traditional assets like securities.
The bipartisan bill, titled H.J. Res 109, garnered support from both Republican and Democratic representatives, with 21 Democrats joining the majority of Republicans in voting for its passage. Despite the bill’s success in the House, President Joe Biden has issued a warning, expressing his intention to veto the legislation if it reaches his desk.
Republican Representative Mike Flood, who introduced the resolution, argued that SAB 121 unfairly burdens banks interested in offering crypto custody services, as custodial assets are typically considered off-balance sheet.
However, the White House has strongly opposed the bill, citing concerns about disrupting the SEC’s efforts to protect investors and the broader financial system. According to the White House, overturning SAB 121 could introduce financial instability and market uncertainty.
SAB 121, introduced by the SEC in March 2022, outlines accounting guidelines for institutions regarding the custody of crypto assets. Critics, including SEC Commissioner Hester Peirce, have voiced concerns that SAB 121 discourages regulated banks from offering crypto custodial services and treats crypto holdings differently from traditional assets.
The House Financial Services Committee (HFSC) hailed the bipartisan resolution, emphasizing its role in removing obstacles preventing regulated financial institutions from acting as custodians of digital assets. HFSC Chairman Representative Patrick McHenry criticized SAB 121 as an example of regulatory overreach under SEC Chairman Gary Gensler’s tenure.
