As a seasoned crypto investor with a keen interest in regulatory developments, I find the recent turn of events surrounding H.J. Res 109 and SAB 121 intriguing. The potential passing of this bill through the House of Representatives is a significant step towards allowing banks to custody crypto assets on their balance sheets, which has been a long-standing issue for the industry.
The US House of Representatives has approved a legislation reversing SEC’s contentious directive barring banks from holding cryptocurrencies as assets.
President Joe Biden had expressed his intention to reject the recently passed legislation if it reached his desk prior to this point.
On May 8, the House approved a bipartisan legislation referred to as H.J. Res 109 in a vote. This bill aims to revoke the Securities and Exchange Commission’s (SEC) Special Accounting Bulletin (SAB 121). Contrary to traditional assets like securities, banks are not required to include crypto assets on their balance sheets under this bulletin.
I, as an analyst, would point out that Republican Congressman Mike Flood expressed his concern over SAB 121 being unjust for banks dealing with cryptocurrency custody. He argued that these custodial assets are typically categorized as “off-balance sheet” items for banking institutions.
Significantly, among Democrats, 21 individuals gave their approval for the bill, while all 207 Republican votes were in favor. Consequently, the bill secured a total of 228 affirmative votes against 182 opposing votes and was subsequently passed.
Although the House of Representatives has approved the bill, President Joe Biden has announced his intention to reject it with a veto.
The White House expressed firm opposition on May 8th to House representatives aiming to reverse SAB 121. This action is criticized for potentially hindering the Securities and Exchange Commission’s (SEC) mission to shield investors in crypto markets and fortify the financial system as a whole.
Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty.
In March 2022, the SEC introduced SAB 121, which sets out the SEC’s accounting rules for institutions aiming to hold cryptographic assets. Significantly, SAB 121 makes it difficult for banks to keep crypto assets on behalf of their clients.
As a crypto investor, I’ve noticed the concern raised by U.S. lawmakers, including SEC Commissioner Hester Peirce, regarding the impact of SAB 121 on regulated banks’ willingness to serve as crypto custodians. In simpler terms, this rule might make banks view crypto assets differently than traditional securities or other forms of property they hold for clients, potentially discouraging them from offering crypto custody services.
The HSFC’s May 8 statement explains that by repealing SAB 121, this bipartisan resolution paves the way for highly regulated financial institutions and firms to serve as custodians of digital assets, thereby safeguarding consumers from potential hindrances.
“Patrick McHenry, chairman of HSFC, pointedly criticized Securities and Exchange Commission (SEC) Chair Gary Gensler, stating, ‘Staff Accounting Bulletin 121 is a striking illustration of the excessive regulatory control that has been a hallmark of Gensler’s time at the SEC.'”
This is a developing story, and further information will be added as it becomes available.
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2024-05-09 02:10