U.S. House lawmakers have voted to roll back an SEC rule on digital asset custody accounting, outlined in the regulator’s Special Accounting Bulletin No. 121.
This regulation practically prevents commercial banks from offering their clients custody services for cryptocurrencies and digital assets, due to the rigorous requirements and regulatory controls it establishes for this purpose.
However, a vote by the U.S. House of Representatives on May 8 highlighted lawmakers' desire to reverse the controversial regulation in the country, in order to expand opportunities for banks and traditional financial institutions in the cryptocurrency market.
Lawmakers are in favor of crypto custody
The House of Representatives voted on Wednesday to approve a bill repealing the SEC’s digital asset accounting bulletin, Special Accounting Bulletin No. 121.
The vote, according to reported The House Financial Services Committee in a press release, closed with 228 votes for and 182 against.
The new bill, approved by a majority in the House of Representatives, “will ensure consumer protection by removing obstacles that prevent highly regulated banks from acting as custodians of digital assets,” the legislative body said.
At X, the crypto community is excited about the recent vote, considering that the new bill to repeal SEC Rule SAB 121 had the support of 21 Democratic lawmakers, who broke ranks to support the growth of cryptocurrencies and digital assets.
They advocate uniform financial regulations
Representative James French Hill, one of the US lawmakers who is in favor of the country’s banks participating in the crypto industry, said that the Joe Biden administration’s SAB 121 regulation “is wrong and should be repealed.” During the House session, he also highlighted that requiring banks to hold reserves against assets in custody is not standard practice in the financial services industry.
To contextualize, the SAB 121 regulations, published in March 2022, requires banks and institutions that hold cryptocurrencies to record and maintain a fair value liability for the assets they hold in custody. It also requires entities to disclose the nature and amount of cryptoassets held in custody for clients.
However, as noted by Rep. French Hill, the onerous requirements the SEC is placing on banks for cryptocurrency custody are not required for other traditional financial asset classes.
On the other hand, Representative Tom Emmer, who called SAB 121 “illegal,” assured that the regulatory policy implemented by the SEC for the crypto industry is only pushing US citizens, cryptocurrency holders, into a vulnerable position, instead of encouraging the creation of regulations that allow the crypto ecosystem to prosper and grow in the country.
However, as expected, not all lawmakers agree with this, and during the House session, there were those who defended the SEC's strict stance. For example, Congresswoman Maxine Waters said that the rules imposed by the SEC only contribute to the security and transparency of the cryptocurrency sector, to mitigate potential fraud. Likewise, President Joe Biden assured that he would veto the new bill, which seeks to override the SEC's regulations on digital asset custody accounting for banks, if it reaches his desk.
On the latter, Paul Grewal, Coinbase's chief legal officer and former U.S. judge for the Northern District of California, stated that despite President Biden's inexcusable veto threat, lawmakers are increasingly in favor of building sensible and appropriate rules for the cryptocurrency and digital asset industry.
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