House Committee Advances Bill to Repeal SEC Bulletin Impacting Crypto Custody Services

• The House Financial Services Committee in the U.S. Congress advances resolution 109 to disapprove SEC SAB 121, aiming to remove restrictions on banks in the crypto custody market.
• Bipartisan support for the resolution, led by Rep. Mike Flood (R-NE) and Rep. Wiley Nickel (D-NC), accuses the SEC of overreaching and limiting the involvement of regulated institutions in digital asset custodianship.
• SEC’s SAB 121, established on April 11, 2022, requires financial entities offering crypto custody services to present a liability on their balance sheets, ensuring the safeguarding of crypto assets for platform users.
• The resolution invokes the Congressional Review of Agency Rulemaking (CRA), seeking to nullify the rule’s impact, marking a significant move in the ongoing debate over crypto regulations.
• Despite bipartisan support, skepticism exists about the resolution’s passage on the House floor, with Variant CLO Jake Chervinsky highlighting potential challenges in securing votes and overcoming procedural hurdles.

Unraveling SEC SAB 121

The House Financial Services Committee of the U.S. Congress has taken a noteworthy step in challenging the regulatory landscape surrounding cryptocurrency custody services. Resolution 109, spearheaded by Rep. Mike Flood and Rep. Wiley Nickel, seeks to disapprove SEC’s Staff Accounting Bulletin 121 (SAB 121), which has been a focal point in limiting the participation of banks and regulated institutions in the burgeoning crypto custody market.

The Controversial Impact and Skepticism

SEC’s SAB 121, instituted in April 2022, mandates financial entities providing crypto custody services to account for their obligations. Critics argue that this rule excessively restricts regulated institutions, making them unsuitable custodians for digital assets. Despite the bipartisan support behind Resolution 109, skepticism looms large. Variant CLO Jake Chervinsky casts doubt on the resolution’s success, citing potential challenges in navigating the House floor, the Democratic Senate, and securing the President’s approval.