US lawmakers have proposed a resolution to put banks in crypto custody

The House Financial Services Committee (HSFC) has backed a resolution that seeks to overturn the United States Securities and Exchange Commission's directive that barred banks from investing in crypto.

In the year At the February 29 hearing, 31 HSFC members from both political lines supported the decision and 20 members opposed it.

“Repealing SAB 121 will protect consumers by removing barriers that prevent highly regulated banks from acting as custodians of digital assets,” the House Financial Services Committee said in a statement.

The SEC's Staff Accounting Notice No. 121 – introduced in March 2022 – is a set of guidelines that require regulated entities to record crypto assets as liabilities on their balance sheets.

Republican Congressman Mike Flood – the lawmaker who introduced the solution – said that it is unfair to banks that want to protect SAB 121, as custody assets are “always considered off balance”, which includes securities such as Bitcoin and digital assets.

“The problems that require banks to keep these assets on their balance sheets are significant.”

“If a bank holds digital assets under the SAB 121 criteria, the treatment on the balance sheet will affect their other regulatory obligations, such as their capital and liquidity requirements,” Flood added.

The resolution was introduced on February 1 by Flood and Rep. Willie Nickell, a Democrat, and SAB 121 went “beyond the scope of bill notification” and effectively became a bogus law.

There is bipartisan agreement that SAB 121 undermines consumer protections and leaves consumers' digital assets vulnerable.

I look forward to finding this scale at the finish line.

Thank you @USRepMikeFlood, @RepWileyNickel and @SenLummis for your leadership. https://t.co/otlpBnnMWW

— Patrick McHenry (@PatrickMcHenry) February 1, 2024

Notably, the resolution still needs a full vote in the House and Senate before SAB 121 can be enacted.

Speaking at a hearing on the investigation, crypto-friendly Republican Congressman Tom Emer said SAB 121 was an “unlawful” example of SEC Char Gary Gensler's “relentless prejudice against the digital asset ecosystem.”

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Emer said SAB 121 introduced an “unnecessary and avoidable” concentration risk to the crypto ecosystem.

“Bitcoin ETFs are a good example. Out of the eleven approved ETFs, not a single bank offers custodial services. This is dangerous,” he added.

.@GaryGensler is violating the SEC's statutory mission with SAB 121.

We must pass @USRepMikeFlood's resolution to end Chairman Gensler's illegal legislation.

See my recommendation below. pic.twitter.com/cn8HQV2cAb

— Tom Emmer (@GOPMajorityWhip) February 29, 2024

On the other hand, Democrat Congresswoman Maxine Waters, one of the lawmakers who opposed the resolution, called the move to repeal SAB 121 a “ridiculous” move from crypto-friendly politicians.

“We often hear Republicans and the crypto industry complain about the lack of transparency from the SEC, but surprisingly, the solution before us prevents SEC staff from providing that transparency around crypto,” she said.

SABs are not enforceable laws under the SEC's view. Instead, it's a series of non-binding guidelines used by SEC staff to clarify how crypto companies should account for customer crypto holdings.

SABs do not require public notice or comment periods like other standard rules.

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