The Federal Reserve Chairman reiterated: Custodial assets are not part of the balance sheet

Federal Reserve Chairman Jerome Powell testified before the U.S. House Financial Services Committee, where Congressman Josh Gottheimer asked him about the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) 121. The bulletin requires banks to include custodied digital assets in their balance sheets, significantly increasing the cost of providing digital asset custody services. Gottheimer cited Powell's previous statement that custodied assets do not belong on a balance sheet and have always been so. Powell generally confirmed this position but did not comment on SEC policy, stating it was within the SEC's jurisdiction. Critics argue that SAB 121 weakens banks' ability to provide secure digital asset custody and pushes these services towards less regulated entities, increasing consumer risk. Lawmakers proposed overturning SAB 121 due to its negative impact. Although Congress passed the first standalone crypto legislation to overturn SAB 121, President Biden vetoed the bill emphasizing the need for a regulatory framework for digital assets.