A bipartisan group of U.S. lawmakers, including Representatives Mike Flood (R-NE), Wiley Nickel (D-NC), and Senator Cynthia Lummis (R-WY), has initiated a move to revoke the Staff Accounting Bulletin 121 (SAB 121) issued by the Securities and Exchange Commission (SEC). This bulletin, which has been a point of contention, mandates banks to include their clients’ cryptocurrency assets on their balance sheets, a requirement that critics argue could deter regulated banks from offering crypto custody services.
The resolution to repeal SAB 121 was introduced on February 1, 2023, under the Congressional Review Act (CRA). This act allows Congress to overturn regulations issued by federal agencies. The lawmakers’ action is a direct response to concerns that SAB 121 unfairly singles out cryptocurrency assets for more stringent treatment than other types of assets held in custody by banks.
In November 2023, several Congress members penned a memo to key financial regulatory leaders, including the Federal Deposit Insurance Commission’s chair, urging clarification or action to assert that SAB 121 does not carry enforceable authority. This move followed a determination by the Government Accountability Office (GAO) that a congressional review of SAB 121 was justified, spurred by a request from Senator Lummis in August 2022. The GAO’s review aimed to assess whether the bulletin could be classified as a “rule” under the Congressional Review Act, which would subject it to congressional oversight.
Senator Lummis has voiced significant concerns regarding the potential impact of SAB 121 on consumer protection and the ability of regulated financial institutions to securely manage Americans’ financial assets. She criticized the SEC for not seeking input from federal banking regulators or the public before issuing what she considers a legally binding directive.
Echoing Senator Lummis’s concerns, Congressman Flood highlighted the lack of consultation with prudential regulators and the absence of a notice-and-comment process typically required for such regulatory actions. He stressed the importance of Congress acting as a check on regulatory overreach.
The effort to repeal SEC’s SAB 121 reflects a broader debate on the regulation of cryptocurrency assets and the role of traditional financial institutions in this emerging sector. By challenging the SEC’s directive, these lawmakers are advocating for a regulatory environment that supports innovation in the crypto space while ensuring robust consumer protection and financial stability.
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