WASHINGTON — The House Financial Services Committee voted to disapprove a Securities and Exchange accounting bulletin that
The House resolution passed in a 31 to 20 vote during a markup on Thursday, with Republicans voting in favor, alongside some Democrats. The bipartisan nature of the resolution means it could get some consideration in the Senate, where Sen. Cynthia Lummis, R-Wyo., is leading a similar effort in that chamber.
"Whether you support crypto or not, you should want the most heavily regulated financial institutions that are experts in custodial banking to safeguard assets," said Rep. Wiley Nickel, D-N.C., the Democratic co-sponsor of the resolution. "Otherwise, people will have to turn to riskier, unregulated options putting both consumers and the financial system at risk."
The accounting bulletin, known as SAB 121,
"You're locking out the most regulated institutions from a market they know well, which is custody," said Rep. Mike Flood, R-Neb., a co-sponsor of the resolution.
But it's still unlikely that the resolution disapproving the guidance would make it into law. Despite a
And some leading Democrats opposed the resolution to disapprove the SEC's bulletin. Rep. Maxine Waters, D-Calif., said that the bulletin gives the crypto industry the clarity it says it wanted from regulators, and that it isn't binding.
"The crypto industry has long complained about the lack of clarity from the SEC when it comes to crypto, and how the SEC supposedly only regulates crypto through enforcement, rather than through regulation," Waters said. "The Staff Accounting Bulletin 121, which is a non-binding SEC staff guidance, seems to offer the very kind of clarity that the crypto industry seeks."
Overturning the bulletin could have long-term implications, she said. Waters said that the guidance was offered to protect investors against the kind of disaster seen with the collapse of FTX, when crypto assets were impossible to trace, intermingled with other kinds of holdings.
"I'm not sure the industry realized that by using the Congressional Review Act to overturn this proposal, it will only harm every market participant from Wall Street banks, private equity firms and crypto companies," she said. "If this Congressional Review Act resolution is signed into law, it will have a chilling effect on the SEC."
Rep. Brad Sherman, D-Calif., said that banks should have to disclose crypto held in custody somewhere, even if it's not directly on their balance sheets, because of the risk of crypto being stolen.
"You can't argue — given all of the fraud and all of the theft in the crypto space — that an entity could hold hundreds of millions or billions of dollars of crypto and not even tell its investors that it is running that risk," he said.
He also had broader questions about whether or not crypto should fulfill what its proponents promise: to function as a real currency, and potentially replace the dollar as the world's reserve currency. That, he said, is not the role it currently plays.
"Crypto is not currently a currency," he said. "Currently, it's an electronic pet rock."
