The U.S. House of Representatives has approved a measure to revoke the Securities and Exchange Commission’s (SEC) contentious guidance that prohibits banks from holding cryptocurrency.
However, President Joe Biden has indicated he would veto the bill if it reaches him.
On May 8, the House passed a bipartisan bill named H.J. Res 109 to overturn the SEC’s Special Accounting Bulletin 121 (SAB 121), which mandated banks to include customers’ crypto assets on their balance sheets, which is not the case for traditional securities.
Representative Mike Flood of the Republican Party, who introduced the resolution, argued that SAB 121 unfairly burdened banks interested in offering crypto custody services, as crypto assets “always considered off-balance sheet.”
The bill garnered support from 21 Democratic representatives along with 207 Republicans, resulting in its passage with 228 votes in favour over 182 against votes.
Despite passing in the House, President Biden opposes the bill and would use his veto power. The White House contends that overturning SAB 121 would impede the SEC’s efforts to safeguard investors in the crypto market and ensure financial system stability.
“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.”
SAB 121, introduced by the SEC in March 2022, outlines accounting standards for institutions interested in custodying crypto assets. Notably, SAB 121 virtually prevents banks from custodying crypto assets on behalf of clients.
U.S. lawmakers, including SEC Commissioner Hester Peirce, argue that SAB 121 discourages regulated banks from acting as crypto custodians and treats crypto holdings differently from other assets.
The House Financial Services Committee (HFSC) applauded the bipartisan bill: “By overturning SAB 121, the bipartisan resolution ensures consumers are protected by removing roadblocks that prevent highly regulated financial institutions and firms from acting as custodians of digital assets.”
“Staff Accounting Bulletin 121 is one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC,” said HFSC Chairman Representative Patrick McHenry.
