KEY POINTS
- Sen. Lummis said SAB 121 had "massive implications"
- Rep. Flood said the accounting policy "goes beyond" a bulletin's scope
- Rep. Nickel argued that the SEC was overstepping its authority through the bulletin
Three U.S. lawmakers moved resolutions on Thursday to repeal the Securities Exchange Commission's (SEC) controversial Staff Accounting Bill (SAB) 121, which puts restrictions on companies that want to have custody of their customers' crypto assets.
The said policy states that custodians of digital assets must report liabilities and "corresponding assets" on their balance sheets so as to protect assets from "significant risks and uncertainties associated" with crypto custodianship. The bulletin was met with criticism from the banking industry.
Representatives Mike Flood, R-Neb., and Wiley Nickel, D-N.C., introduced a matching resolution, calling for SAB 121 to be repealed. Rep. Flood said the policy "goes beyond the scope of an accounting bulletin and is effectively a rule."
Nickel echoed Flood's statements, arguing that the SEC was overstepping its authority through the accounting rule.
"I'll continue to work in a bipartisan way to ensure that banks can safely hold digital assets for investors," he said in a statement.
Sen. Cynthia Lummis, R-Wyo., introduced a Senate resolution that called for the accounting rule's disapproval, arguing that under the U.S. Code, "such rule shall have no force or effect."
Since the accounting rule states that companies keeping cryptocurrencies for clients should report the assets on their balance sheets, it will be a significantly expensive move for banks seeking to provide crypto custody services as banks will need to have a dollar of capital for each dollar of assets they keep in custody.
Sen. Lummis noted that the bulletin has "massive implications," adding that the SEC should have asked for feedback from federal banking regulators and the public before the directive was announced.
SEC Commissioner Hester Pierce, who is known for defending the crypto sector, also criticized the controversial SAB back in 2022.
"If we are trying to encourage companies to enter our public markets, we ought to embrace a more deliberate approach to changing rules – one that involves consulting with affected parties," she wrote in a statement .
Meanwhile, SEC chair Gary Gensler defended SAB 121 last month, saying it was "just a staff accounting bulletin," adding that it was consistent with what U.S. bankruptcy courts have said about crypto assets.
The latest call-out by lawmakers of the SEC's accounting policy comes amid mounting criticism over a series of issues that the regulator had been faced with in recent months, including a judge's order to explain statements the SEC made in its case against crypto project DEBT Box.
More recently, Gensler was under pressure by lawmakers to explain the security lapse linked to the compromised X (formerly Twitter) account of the financial regulator. A hacker breached a SEC employee's phone number and gained access to the commission's X account then published a false report.
The said incident came at a time when the cryptocurrency network waited for the announcement regarding the approval of spot bitcoin ETFs (Exchange Traded Funds).
