The U.S. House of Representatives is set to vote on a resolution proposed by Representatives Wiley Nickel and Mike Flood that aims to formally disapprove of the SEC’s Staff Accounting Bulletin (SAB) 121. This controversial bulletin, launched in April 2022, requires banks to list liabilities and corresponding digital assets on their balance sheets. The resolution seeks to press the SEC to reconsider this accounting guidance, which has been criticized for its lack of transparency and failure to consult with relevant stakeholders in the banking and financial industry.
During his congressional testimony, Rep. Flood criticized the SEC for not collaborating with Federal banking agencies before implementing SAB 121. He noted that the regulator should have consulted with registrants, accounting firms, standard-setting bodies, trade groups, and other agencies. Banking institutions hoping to offer custodial services for digital assets have also raised concerns about SAB 121, as it hinders their ability to provide these services for products such as spot Bitcoin ETFs. The Securities Industry and Financial Markets Association president highlighted that the bulletin’s requirement for balance sheet recognition deviates from the accounting treatment for traditional assets held in custody.
Chairman Gensler, who heads the SEC, has faced backlash for the agency’s aggressive regulatory approach to cryptocurrencies. Under his leadership, the SEC has taken legal action against numerous digital asset firms. Senator Cynthia Lummis is spearheading a joint senate resolution in support of Rep. Flood’s proposal, although it is yet to be voted on. The outcome of these resolutions is uncertain, and it remains to be seen whether they will pass their respective chambers. Critics argue that SAB 121 sets a dangerous precedent and should be reconsidered to ensure fair and efficient markets for all stakeholders in the financial industry.
