Financial Associations Call on President Biden to Overturn SEC's Controversial Crypto Rule

Financial Associations Call on President Biden to Overturn SEC's Controversial Crypto Rule

Four major financial associations have written to President Joe Biden, asking him to sign a Congressional resolution that would overturn the Securities and Exchange Commission's (SEC) controversial "Staff Accounting Bulletin 121" (SAB 121). The American Bankers Association, Bank Policy Institute, Financial Services Forum, and Securities Industry and Financial Markets Association, collectively known as "Associations," support the resolution, H.J. Res. 109, which aims to nullify SAB 121.

The resolution, introduced by a bipartisan group of lawmakers, passed with strong support in both the Senate and the House. The Associations argue that SAB 121, released by the SEC in March 2022 without proper consultation or public comment, creates significant problems for publicly traded companies that hold digital assets for their customers.

SAB 121 requires these companies to record the value of customer-held digital assets on their own balance sheets, which goes against the standard accounting practice of keeping custodied assets separate. This makes it very difficult for regulated banks to offer digital asset custody services at a large scale, as they would face higher capital, liquidity, and other regulatory requirements compared to their non-bank competitors.

The Associations believe that by preventing regulated banks from providing digital asset custody services, SAB 121 ultimately harms investors, customers, and the financial system. It limits the market to custody providers that don't offer the same level of legal and regulatory protection as federally-regulated banks. SAB 121 also makes it harder for banks to develop responsible uses for blockchain technology and hinders regulated broker-dealers from offering custody services due to the SEC's net capital rule.

In a previous letter to the SEC in February 2024, the Associations pointed out that SAB 121 has hindered their member banks' ability to develop and bring certain digital asset products and services to market over the past two years. They argue that SAB 121 significantly departs from long-standing accounting treatment for custodied assets and threatens the industry's ability to provide customers with safe and reliable custody of digital assets.

The Associations have respectfully asked President Biden to sign H.J. Res. 109 into law, which would nullify SAB 121 and allow regulated banks to offer digital asset custody services without facing prohibitive financial implications. They believe this action is necessary to protect investors, customers, and the integrity of the financial system.

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