The House Financial Services Committee is making strides in advancing US Rep Mike Flood’s bill to revoke Staff Accounting Bulletin (SAB) 121 rule this Thursday. This move is pivotal in paving the way for a surge in institutional crypto adoption. Perianne Boring, CEO of the Chamber of Digital Commerce, revealed the the update stating, “Momentum is building in Washington.”

Legal Actions & Statements Against SAB 121

Earlier, Senator Lummis voiced her concerns, stating, “SAB 121 has massive implications, and the SEC should have received feedback on it from the federal banking regulators and the public before implementing this legally binding directive.” She emphasized the necessity of ensuring consumer protection and the ability of well-regulated financial institutions to securely custody Americans’ assets.

Congressmen Mike Flood and Wiley Nickel are taking action by introducing a resolution under the Congressional Review Act, asserting that the rule should have no force or effect. Additionally, they’re spearheading the Uniform Treatment of Custodial Assets Act, which aims to exempt banks from treating custodied assets as liabilities and prevent additional capital requirements for offering custody services for crypto-assets. Senator Cynthia Lummis is a staunch supporter of this crypto bill.

The American Bankers Association expressed its concerns, stating, “The SEC’s Staff Accounting Bulletin 121 represents a significant departure from longstanding accounting treatment for custodied assets and threatens the banking industry’s ability to provide its customers with safe and sound custody of digital assets.”

Limiting banks’ capacity to offer these services poses risks for consumers and diminishes their trusted options for managing digital asset portfolios. Furthermore, various financial institutions including the Bank Policy Institute, Financial Services Forum, and SIFMA stand in solidarity with the legislators’ efforts.

Also Read: USDC Stablecoin Growth with Circle and Coincheck Deal in Japan

How SAB 121 Poses A Threat To Crypto Adoption?

SAB 121 imposes stringent requirements, compelling all listed companies, beyond banks, to disclose crypto-assets under custody as both assets and liabilities on the balance sheet. This accounting approach contradicts the convention that custodied assets do not belong to the company and shouldn’t be reflected on the balance sheet.

For banks, this rule significantly impacts their capital requirements as they must hold capital equivalent to assets under custody, presenting a staggering challenge for compliance. For instance, BNY Mellon would need $48 trillion in capital if the rule were applied universally.

The Basel Committee, responsible for setting bank capital and liquidity standards, does not advocate for this accounting treatment. Even with its rules on crypto-assets, it explicitly stated that such assets shouldn’t be included on balance sheets, albeit with certain risk-related considerations.

Moreover, the banking sector strongly opposes SAB 121. Former State Street Digital head Nadine Chakar described it as ‘insane,’ and State Street Digital underwent restructuring along with staff layoffs shortly after Spot Bitcoin ETF launch.

Moreover, during a Congressional hearing, Federal Reserve Chair Jerome Powell acknowledged the unconventional nature of SAB 121’s treatment. Earlier, in November 2023, lawmakers urged the Federal Reserve and Office of the Comptroller of the Currency (OCC) to disregard SAB 121, underscoring the growing dissent towards its implications.

Also Read: Hong Kong Introduces Rules to Foil Suspicious OTC Crypto Trades

The post House Republican’s Pro-Crypto Bill Gets Major Push, Institutional Adoption To Soar? appeared first on CoinGape.

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Filed under: News - @ January 1, 1970 12:00 am