A group of United States Congress members has forwarded a memo pressing key financial authorities to clarify the enforceability of the SEC’s Staff Accounting Bulletin 121 (SAB 121) in light of a recent Government Accountability Office (GAO) finding. According to the memo, the Congress members argue against SAB 121’s legal validity and advocate against imposing compliance requirements related to custody services for digital assets provided by banks, credit unions, and other financial institutions.
This move comes after industry representatives, along with several lawmakers, raised concerns about the implications of SAB 121, highlighting its potential impact on regulated banks serving as crypto custodians. The GAO’s investigation, initiated following Senator Cynthia Lummis’s letter to the U.S. Comptroller General, focused on determining whether SAB 121 qualifies as a rule under the Congressional Review Act, signaling potential congressional intervention.
The Congress members, including Lummis, Senator Kirsten Gillibrand, and Representatives Patrick McHenry, French Hill, Ritchie Torres, Mike Flood, and Wiley Nickel, underscored worries that enforcing this rule could establish problematic precedents, circumvent regulatory procedures, and expand the SEC’s authority beyond Congress’s mandate.
Recent actions included senators expressing disapproval of what they labeled as ‘backdoor regulation’ to SEC Chair Gary Gensler in June 2022, while Flood addressed the issue during his appearance before the House Financial Services Committee in September.
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