Skip to Content
Rep. Elise Stefanik, Chairwoman
subscribe
SUBSCRIBE

Press Releases

House Republicans Are Fighting Joe Biden’s Illegal Regulatory Overreach

Washington, May 8, 2024
  • Joe Biden
Over two years ago, Joe Biden’s Securities and Exchange Commission (SEC) illegally disguised “Staff Accounting Bulletin 121” or SAB 121 as guidance. This is just another example of the Biden Administration circumventing Congress to weaken consumer protections and hinder competition by preventing financial institutions and firms from providing Americans custody of their digital assets. 
 
That is why today House Republicans are bringing to the floor, H.J. Res. 109, which would overturn SAB 121. This resolution was first introduced by Rep. Mike Flood (R-NE) and ensures Americans can have custody of their digital assets in one of the safest ways possible.
 
FACTS ON H.J. RES. 109 (Courtesy of the House Financial Services Committee Republicans):
 
Top Line: The Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121) weakens consumer protections, impedes financial innovation, and hinders competition by preventing financial institutions and firms from providing custodial services for digital assets.
 
What is SAB 121?
  • SAB 121 expresses the views of SEC staff regarding how certain entities should treat their custodial obligations when safeguarding digital assets for their customers. Specifically, SAB 121 requires entities that are safeguarding digital assets for users to record on their balance sheet a liability and a corresponding asset at the fair value of the digital assets. SAB 121 also specifies certain disclosure requirements around the digital asset. This treatment deviates from traditional custodial practices, which allow custodial assets to receive off-balance sheet accounting treatment.
  • SAB 121 was issued on March 31, 2022. More than a year later, on October 31, 2023, the Government Accountability Office (GAO) determined that SAB 121 constitutes a “rule” for purposes of the Congressional Review Act (CRA).
What has been the impact of SAB 121?
  • Because SAB 121 requires custodians to account for customers’ digital assets on their own balance sheets, financial institutions have to take on significant capital, liquidity, and other costs under the existing prudential regulatory framework. As a result, these entities have been prevented from engaging in digital asset custody. Forcing financial institutions to hold digital assets—safeguarded on behalf of their customers—on balance sheet may leave Americans’ assets more vulnerable if a custodian becomes insolvent or enters receivership.
Why is it necessary to overturn SAB 121?
  • One of the only issues keeping financial institutions and firms from engaging in digital asset custody is SAB 121. In fact, the federal banking regulators have confirmed that digital asset custody is a permissible activity and have set out guidelines for the safe and secure custody of digital assets. This shows that the SEC, a market regulator, is trying to dictate banking policy with zero input from prudential regulators and the public.
  • H.J. Res. 109 was introduced on February 1, 2024, by Representative Mike Flood (R-NE) and is cosponsored by Majority Whip Tom Emmer (R-MN), Rep. Wiley Nickel (D-NC), and Rep. Darren Soto (D-FL). Senator Cynthia Lummis (R-WY) introduced a companion Resolution in the Senate. 
Bottom Line: By overturning SAB 121, Congress will ensure Americans can have custody of digital assets in one of the safest ways possible—through highly regulated banks—and financial institutions are in fact able to engage in digital asset related activity.