Fed Chair Powell Reaffirms Stance on Custody Assets Amid SEC Crypto Rule Controversy

On Wednesday, Federal Reserve Chair Jerome Powell testified before the U.S. House Financial Services Committee, where Congressman Josh Gottheimer (D-NJ) questioned him about the SEC’s Staff Accounting Bulletin (SAB) 121. This bulletin mandates that banks include digital assets held in custody on their balance sheets, significantly raising the cost of providing digital asset custody services. Gottheimer referenced Powell’s previous statement that “custody assets are off balance sheet and always have been.” Powell confirmed this stance generally but did not comment on SEC policies, stating it’s the SEC’s domain.

Critics argue SAB 121 undermines banks’ ability to offer secure digital asset custody, pushing these services to less regulated entities and increasing consumer risk. Lawmakers proposed resolutions to overturn SAB 121, citing its negative impact. Although the U.S. Congress passed its first standalone crypto legislation to overturn SAB 121, President Biden vetoed it, stressing the need for a regulatory framework for digital assets.