42 US lawmakers urge SEC to permit banks to hold crypto

In a recent communication to the US Securities and Exchange Commission (SEC), 42 Congressmen called on the agency to permit banks to custody cryptocurrency.

This request directly challenges the guidelines established by Staff Accounting Bulletin No. 121 (SAB 121).

Lawmakers assert that SAB 121 contradicts established accounting norms, potentially increasing risks for consumers due to inaccurate representations of custodial obligations.

Prominent signatories, including Patrick McHenry, Cynthia Lummis, French Hill, and Tim Scott, highlighted the overwhelming bipartisan support for disapproving SAB 121.

The letter criticised the issuance of SAB 121 for lacking consultation with prudential regulators.

The legislators argue that the accounting methods prescribed by SAB 121 do not accurately reflect custodians' legal and economic responsibilities.

According to them, this misrepresentation could elevate the risk of financial losses for consumers.

“Both the House and Senate vote on H.J. Res. 109 sent a clear message from Congress to the SEC. Issuing staff guidance to impose policy changes is not appropriate and violates both the spirit and the letter of the Administrative Procedure Act,” the letter stated.

SAB 121 mandates that crypto-holding entities report their clients' crypto assets on their balance sheets, requiring custodians to recognise a liability.

This regulation discourages banks from offering custody services, which could hinder key prudential requirements.

In July, the SEC had allowed public companies to bypass this reporting requirement under certain conditions, aiming to alleviate the impact of SAB 121.

Congressional representatives are now advocating for broader approval for banks to custody crypto assets.

If the SEC accepts this request backed by 42 signatures, it could enhance storage options for investors in a climate of increasing institutional interest in Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) ETFs.

According to the Congressmen, such approval would be crucial for creating safe and secure custodial arrangements for digital assets in the US.