In a memo, US Congress members state that Federal banking agencies should not require financial institutions to provide the U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin 121 (SAB 121).
In response to a recent finding by the Government Accountability Office (GAO), several members of the United States Congress have authored a memorandum urging key financial authorities, such as the acting comptroller of the currency and the chair of the board of the Federal Deposit Insurance Commission, to clarify whether the U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin 121 (SAB 121) is non-enforceable.
The congressional members expressed in the memorandum that SAB 121 should not be legally binding and that the National Credit Union Administration and federal banking agencies should not impose compliance requirements on financial institutions, including banks, credit unions, and others offering custody services for digital assets.
According to SAB 121, the bank must record the crypto assets of its consumers on its balance sheet in a manner that accurately reflects the assets’ value and mandates the maintenance of capital against them.
Several U.S. legislators and industry representatives have argued that it undermines the willingness of regulated banks to act as crypto custodians and differentiates crypto holdings from other assets.
Senator Cynthia Lummis’s August 2022 letter to the U.S. Comptroller General prompted the GAO to conclude that SAB 121 of the SEC should be subject to congressional review. Whether the bulletin meets the criteria for a rule under the Congressional Review Act was the primary focus of the evaluation.
Per the act’s provisions, an agency rule must be reported to the Comptroller general and both chambers of Congress. Furthermore, the rule is subject to congressional disapproval.
The members of Congress, including Lummis, Senator Kirsten Gillibrand, Representatives Patrick McHenry, French Hill, Ritchie Torres, Mike Flood, and Wiley Nickel, voiced apprehension regarding the potential establishment of a concerning precedent should this rule be enforced in violation of regulations.
Legislators assert that it could permit regulatory maneuvering to circumvent the Administrative Procedure Act, thereby granting the SEC regulatory authority over institutions that Congress has not authorized.
In a June 2022 letter to SEC Chair Gary Gensler, five senators disapproved of “backdoor regulation.” Furthermore, in September, during his appearance before the House Financial Services Committee, Flood delivered a lecture to Gensler regarding the bulletin.
