In a letter today to House leaders, the American Bankers Association and three banking associations expressed their support for a joint resolution to overturn a Securities and Exchange Commission staff accounting bulletin that changes the way banks and other publicly traded entities are expected to account for digital assets held in custody. H.J. Res. 109, introduced by Reps. Mike Flood (R-Neb.) and Wiley Nickel (D-N.C.), would overturn SEC Staff Accounting Bulletin 121 if passed by both houses and signed by the president. The House today voted 228-182 to approve the resolution, with support from members of both parties.
SAB 121 “effectively precludes banks from offering digital asset custody at scale since placing the value of client assets on their balance sheets will impact certain capital, liquidity and other prudential requirements,” the associations said in the letter. “Furthermore, SAB 121 undercuts the ability of banks to develop responsible use cases for distributed ledger technology and encumbers regulated broker-dealers from custody services as a result of the net capital rule, which treats the on-balance sheet items as non-allowable assets.”
The associations added that SAB 121 represents a significant departure from longstanding accounting treatment for custodial assets and threatens the industry’s ability to provide its customers with safe and sound custody of digital assets. “Limiting banks’ ability to offer these services leaves customers with few well-regulated, trusted options for safeguarding their digital asset portfolios and ultimately exposes them to increased risk,” they said.
