House passes resolution overturning SEC rule on crypto and digital asset custody

The US House of Representatives has passed Representative Mike Flood’s (NE-01) bipartisan H.J.Res. 109, which aims to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121 under the Congressional Review Act (CRA).

The resolution seeks to protect consumers by removing roadblocks that prevent highly regulated financial institutions and firms from acting as custodians of digital assets.

SAB 121, issued by the SEC, requires financial institutions and firms safeguarding their customers’ digital assets to hold those assets on their balance sheets, making it cost-prohibitive for them to do so.

The bipartisan resolution, H.J.Res. 109, nullifies SAB 121, which supporters argue will allow consumers to hold their digital assets in one of the safest ways possible—through highly regulated banks and other financial institutions.

Chairman McHenry (NC-10) praised the resolution, highlighting how SAB 121 has made digital asset custody “cost prohibitive” for financial institutions and firms. He further said that SAB 121 was “one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC.”

“Rep. Flood’s bipartisan, pro-consumer H.J.Res. 109 nullifies the SEC’s disastrous SAB 121 and brings commonsense into our digital asset policy,” Chairman McHenry stated.

Congressman Mike Flood emphasized the importance of the resolution, noting that the Biden administration has been testing the limits of and taking shortcuts around public rulemaking processes. Congressman Flood argues that SAB121 has “set a disturbing precedent” and was not “the appropriate vehicle to promulgate accounting guidance for digital asset custodians.”

The passage of H.J.Res. 109 in the House with support from both sides of the aisle highlights the growing concern over the SEC’s approach to regulating digital assets and the potential impact on consumers and financial institutions. The resolution now moves to the Senate, where its supporters urge action to deliver a full repeal of SAB 121.