House Committee moves to overturn SEC crypto bulletin

The House Financial Services Committee has voted in favor of a resolution to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121), which mandates financial firms to list customer crypto holdings as liabilities. The resolution, introduced by Rep. Mike Flood and supported by a 31-20 vote, aims to prevent significant ramifications for banks, particularly affecting their ability to act as custodians for spot bitcoin exchange-traded funds (ETFs). The measure will now proceed to the full House and Senate for consideration.

SAB 121 has been criticized for its potential impact on the banking sector’s regulatory obligations, including capital and liquidity requirements. The resolution’s advancement follows a coalition of trade groups representing major U.S. banks urging SEC Chair Gary Gensler to reconsider the bulletin, citing concerns for the banking ecosystem’s safety and stability. While some lawmakers, like Rep. Maxine Waters, defend the bulletin for providing clarity and investor protection, others argue it limits the SEC’s future guidance issuance and has been enacted without proper consultation with prudential regulators.

The Committee also unanimously passed the Combating Money Laundering in Cyber Crime Act, which clarifies the U.S. Secret Service’s authority over digital asset-related criminal activity. This move comes amidst a broader debate over the SEC’s role in the crypto industry, with SEC Commissioner Hester Peirce calling for clearer rules to foster innovation without legal uncertainty. The SEC’s enforcement actions have faced challenges, including a lawsuit by eleven U.S. state attorneys general against Kraken’s parent company, Payward Ventures, questioning the SEC’s authority over crypto firms.