House of Representatives to Vote on Overturning SEC Guidance on Cryptocurrency Custody

House of Representatives to Vote on Overturning SEC Guidance on Crypto Custody

In a highly anticipated move, the House of Representatives is set to vote on Wednesday on a measure that would overturn guidance from the Securities and Exchange Commission (SEC) regarding the custody of cryptocurrencies. The guidance, known as Staff Accounting Bulletin 121, has sparked controversy among banks, who argue that it would hinder their ability to custody crypto assets for clients.

The Republican-led House Financial Services Committee has already passed a Congressional Review Act measure on SAB 121, which requires companies custodying cryptocurrencies to account for them as liabilities on their balance sheets. Banks fear that this guidance would effectively exclude them from the crypto custody business, with Bank of New York Mellon already feeling the impact on its plans to enter this market.

The full House is expected to vote on the measure on Wednesday, following efforts by Republicans to have the resolution recognized under the Congressional Review Act. The Government Accountability Office has indicated that the CRA could apply in this situation.

The resolution, introduced by Reps. Wiley Nickel (D-N.C.) and Mike Flood (R-Neb.), has a companion legislation in the Senate sponsored by Sen. Cynthia Lummis (R-Wyo.). Despite facing opposition from some congressional Democrats, the resolution has a Democratic co-sponsor and is considered one of the more likely CRA resolutions to be enacted.

During a heated debate on the House floor, Rep. Maxine Waters (D-Calif.) raised concerns about overturning the SEC guidance, arguing that it would provide less clarity for the crypto industry and consumers. On the other hand, Flood criticized the SEC for not consulting bank regulators before issuing the bulletin, citing support from Federal Reserve Chair Jerome Powell and acting Comptroller of the Currency Michael Hsu.

The outcome of the House vote on overturning Staff Accounting Bulletin 121 will have significant implications for the future of crypto custody regulation and the relationship between regulatory agencies and the financial industry. Stay tuned for updates on this developing story.