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McHenry, Lummis Release Statement Following GAO Determination on Staff Accounting Bulletin 121

Washington, Oct 31 -

Today, Financial Services Committee Chair Patrick McHenry (R-NC) and U.S. Senator Cynthia Lummis (R-WY) released the following statement after the Government Accountability Office (GAO) determined that Staff Accounting Bulletin 121 (SAB 121) is a rule for the purposes of the Congressional Review Act. SAB 121 greatly harms consumers and is a clear overreach of the authority of the U.S. Securities and Exchange Commission (SEC).  

“The GAO confirmed what many suspected: SAB 121 is subject to Congressional review,” said Chairman McHenry. “This rule would impose massive new requirements on financial institutions and other firms to place digital assets on their balance sheets as a liability with a corresponding asset. Ultimately, this would deter institutions and firms from offering custodial services—denying Americans access to safe and secure custody of their assets. SAB 121 was drafted with zero input from prudential regulators and the public, and now Congress must step in to block this harmful rule.”

“Staff Accounting Bulletin 121 should have been an official rule issued by the SEC through the normal process of federal rulemaking. This bulletin has massive implications, and the SEC should have received feedback on it from the federal banking regulators and the public before implementing this legally binding directive,” said Senator Lummis. “I have serious concerns over the impact of this bulletin on consumer protection and ensuring well-regulated financial institutions are able to provide safe custody for Americans’ hard-earned financial assets is my top priority. This sets an incredibly dangerous precedent. I plan to use the Congressional Review Act to block this rule in the coming weeks.”

Background:

SAB 121 was issued by the SEC on April 11, 2022. It was intended to clarify the accounting treatment of crypto assets by banks and financial institutions, but instead has placed customers more at risk if a bankruptcy should occur and will likely create prohibitive capital costs for institutions that custody crypto assets for consumers. 

In March 2023, McHenry and Lummis sent a letter to the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the National Credit Union Administration to seek clarification on SAB 121.

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