SE Nebraska News

U.S. Congressmen Mike Flood (R-NE) and Wiley Nickel (D-NC) have introduced a resolution to repeal the U.S. Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) 121. This resolution, introduced under the Congressional Review Act (CRA), aims to overturn SAB 121, which prevents banks from providing custodial services to digital asset investors by requiring them to keep those assets on-balance sheet.

Congressman Flood expressed his concerns about the overreach of the SEC, stating, "The SEC issued SAB 121 without conferring with prudential regulators despite the accounting standard’s effects on financial institutions’ treatment of custodial assets, and the SEC issued SAB 121 without going through the notice-and-comment process." He emphasized the role of Congress in serving as a check on regulatory overreach and expressed his pride in introducing a bipartisan resolution with Senator Cynthia Lummis and Congressman Wiley Nickel.

Congressman Nickel also criticized the SEC's approach to digital assets, stating, "Gary Gensler and the Security and Exchange Commission continue to overstep their authority, and it's time for Congress to weigh in on Staff Accounting Bulletin No. 121." He highlighted the importance of ensuring that banks can safely hold digital assets for investors and pledged to work in a bipartisan manner to achieve this goal.

Senator Cynthia Lummis echoed the concerns of the congressmen, expressing her worries about the impact of SAB 121 on consumer protection and the ability of well-regulated financial institutions to provide safe custody for Americans' financial assets. She emphasized the need for the SEC to receive feedback from federal banking regulators and the public before implementing such a directive.

Various industry organizations have expressed their support for the proposed repeal of SAB 121. The American Bankers Association commended Senator Lummis and Representatives Flood and Nickel for their leadership on this issue, stating that SAB 121 threatens the banking industry's ability to provide safe custody of digital assets and leaves consumers with limited options.

The Bank Policy Institute highlighted the concerns that SAB 121 would prevent highly regulated U.S. banking organizations from offering custodial solutions for digital assets, resulting in non-banking organizations taking on this role and increasing risks for customers.

The Financial Services Forum commended the introduction of the resolution, emphasizing that the current capital requirements in SAB 121 effectively prevent banks from offering digital asset custody services. They praised the resolution for allowing U.S. banks to offer these services in a regulated and safe manner.

SIFMA (Securities Industry and Financial Markets Association) also expressed their gratitude for the efforts of Senator Lummis, Congressman Flood, and others in Congress to address SAB 121. They highlighted the need for a deliberate and comprehensive process to avoid unintended consequences and restore the ability of banks to provide custodial services for digital assets.

In addition to the resolution, Congressmen Flood and Nickel are leading sponsors of the Uniform Treatment of Custodial Assets Act, which aims to rescind SAB 121 and ensure that assets custodied by banks, credit unions, and trusts are kept off-balance sheet in line with longstanding practice.

The resolution introduced by Congressmen Flood and Nickel and the companion measure introduced by Senator Lummis under the CRA can be found on the respective government websites. The full bill of the Uniform Treatment of Custodial Assets Act is also available for reference.

In summary, Congressmen Flood and Nickel, along with Senator Lummis, have introduced a resolution to repeal the SEC's Staff Accounting Bulletin 121. This resolution aims to address concerns about the overreach of the SEC and the impact of SAB 121 on the ability of banks to provide custodial services for digital assets. Industry organizations have expressed their support for the proposed repeal, highlighting the potential risks and limitations imposed by SAB 121. The resolution is part of a broader effort to restore the traditional treatment of custodial assets and ensure the safe custody of digital assets by regulated financial institutions.