McHenry, Lummis Send Letter Seeking Clarity on Digital Asset Accounting Regulations
Letter requests clarification on guidance for the accounting treatment of digital assets
Washington,
March 2, 2023 -
House Financial Services Committee Chairman Patrick McHenry (R-NC-10) and U.S. Senator Cynthia Lummis (R-WY) 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 following up on a letter seeking clarification on Staff Accounting Bulletin 121 (SAB 121), which changed the way banks and financial institutions are expected to account for the custody of digital assets.
The letter reads: “Typically, custodial assets receive off-balance sheet accounting treatment. This is largely because customers retain ownership of their custodial assets and financial institutions are not permitted to conduct proprietary trading with customer assets. As emphasized in comment letters, SAB 121 ‘deviates from existing accounting treatment of safeguarded assets held in a custodial capacity, which does not result in assets or liabilities reported on the custodian’s balance sheet.’ In sum, the effect of SAB 121 is to deny millions of Americans access to safe and secure custodial arrangements for digital assets.”
SAB 121 was issued by the Securities and Exchange Commission (SEC) on April 11, 2022. It was intended to clarify the treatment of digital assets by banks and financial institutions, but instead has created greater risk in the system and will likely create significant compliance costs for institutions that custody digital assets for customers.
Read the full text of the letter here.
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