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The House of Representatives Committee on Financial Services votes in favor of the resolution to rescind SAB 121.

The cancellation of this document could have significant consequences for cryptocurrency companies and investors, opening the door to possible regulatory changes.

Date: 2024-03-04 Author: Marek Stiller
The House of Representatives Committee on Financial Services votes in favor of the resolution to rescind SAB 121.

On Thursday, the House of Representatives Financial Services Committee voted in favor of a resolution that would “reverse” the US Securities and Exchange Commission ‘s (SEC) controversial SAB 121 bulletin on accounting for digital assets.

A majority of committee members approved the resolution, which seeks to repeal the bulletin, Representatives Mike Flood (R-NE) and Wiley Nickel (D-NC). SAB 121, a bulletin that would have forced banks to place cryptocurrency deposits on their balance sheets, significantly reducing their participation in the digital asset ecosystem.

SAB 121 outlines “serious consequences” for the banking sector.

Congressman Flood was unhappy with the SEC’s announcement, as he believes it will have huge implications for the entire banking sector.

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He noted that the implications of having to keep these assets on the balance sheet are quite significant. On-balance-sheet recognition would affect a bank’s other regulatory obligations, such as capital and liquidity requirements, if the bank were to hold digital assets under the parameters of SAB 121. In the end, banks must choose either to hold digital assets, which would increase their balance sheet and significantly affect other activities, or to stay out of the market.

Banks are eager to join bitcoin ETFs as depositories.

In addition, Flood said that financial institutions are not currently allowed to be depositories for the recently SEC-approved Bitcoin ET Fs under SAB 121.

He added, “It’s a situation where you may need more bank depositaries on the job who are well-regulated depository experts .” “Right now there are only four depos itories for these eleven Bitcoin ETFs, and they are not all non-banks.”

Flood and Wiley’s resolution, however, was not accepted by everyone present at the committee meeting. Congresswoman Maxine Waters (D-CA) spoke in response to the committee’s criticism of SAB 121.

Waters said: “This bulletin provides non-binding guidance to SEC staff to help clarify how a company should account for its customers’ cryptocurrencies.” “We often hear Republicans and the crypto industry complain about the SEC‘s lack of transparency, but ironically, the resolution before us effectively blocks the SEC staff from providing such transparency with respect to cryptocurrencies.”

The resolution overturning SAB 121 is moving forward.

The committee vote comes just weeks after a coalition of industry groups representing some of the largest banks in the United States implored SEC Chairman Gary Gensler to modify the employee accounting bulletin, arguing that it raises “important questions about the safety and stability” of the banking ecosystem. The resolution will now go to the House of Representatives for a full vote.

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Marek Stiller
Marek Stiller
Founder of the "Cryptocurrency for Beginners" channel on YouTube. He collaborates with Łukasz to form the Arena Trading group, while at the same time being passionate about blockchain technology. His knowledge and experience in the cryptocurrency industry help beginner investors better understand this dynamic market.
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