Lawmakers in the US House of Representatives have voted to approve a reversal of an SEC rule on digital asset custody accounting, framed in the regulator’s Special Accounting Bulletin No. 121.
The rule virtually prevents commercial banks from offering their customers services related to cryptocurrency and digital asset custody due to the strict regulatory requirements and controls that were put in place.
However, a vote by the US House of Representatives on 8 May brought to light lawmakers’ desire to reverse the controversial regulation in the country, in order to expand options for banks and traditional financial institutions in the cryptoasset market.
Lawmakers are in favour of cryptocurrency custody
On Wednesday, the House of Representatives voted to pass a bill that repeals the SEC’s digital asset-related accounting bulletin, Special Accounting Bulletin No. 121.
The vote, according to information from the House Financial Services Committee in a press release, closed with 228 votes in favor and 182 against.
The new bill, voted 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 stated.
Since the announcement, the cryptocurrency community is thrilled with the latest vote, considering that the newly released bill to repeal SEC rule SAB 121 has enjoyed the support of 21 Democratic lawmakers, all of whom have broken ranks to back the development of cryptocurrencies and digital assets.
Advocates call for single financial regulation
Representative James French Hill, one of the US lawmakers in favor of US bank intervention in the cryptocurrency sector, declared that the Joe Biden administration’s SAB 121 regulation ‘is wrong and should be repealed’. In the House session, he also stressed that requiring banks to hold reserves against assets in custody is not standard practice in the financial services industry.
For context, SAB 121, issued in March 2022, obligates banks and institutions holding cryptocurrencies to record and maintain a fair value liability for assets held in custody. It also requires entities to disclose the nature and amount of cryptoassets held in custody for customers.
However, as Representative French Hill emphasized, the costly requirements that the SEC asks of banks for the custody of cryptocurrencies are not imposed on other classical financial asset classes.
In contrast, Representative Tom Emmer, who described SAB 121 as ‘illegal,’ said that the SEC’s regulatory policy for the crypto-industry only places US citizens who hold cryptocurrencies in a vulnerable position, rather than encouraging the creation of regulations that will allow the cryptocurrency ecosystem to flourish and grow in the country.
But as expected, not all lawmakers agree with this, and in the House of Representatives session, there were those who defended the SEC’s strict stance. Congresswoman Maxine Waters, for example, said that the rules imposed by the SEC only bring security and transparency to the cryptocurrency industry, in order to mitigate potential fraud. Similarly, President Joe Biden guaranteed that he would veto the new bill, which seeks to override the SEC’s rules on digital asset custody accounting for banks, should it reach his desk.
