Legislative Scrutiny on SEC’s Crypto Custody Rule: A Forward-Looking Stance on Cryptocurrency Regulation
Congress members Mike Flood, Wiley Nickel, and Senator Cynthia Lummis have introduced measures to repeal the Staff Accounting Bulletin 121 (SAB 121) from the U.S. Securities and Exchange Commission (SEC). The ‘SEC crypto custody rule,’ as it’s widely referred to, imposes constraints on banks that aim to safeguard their customers’ cryptocurrency assets, requiring them to record these digital assets in the balance sheet. This trio initiated a resolution under the Congressional Review Act on February 1, 2023, to formally express disapproval of the accounting rule, arguing its lack of legal basis. The SEC’s choice to release the SAB 121 without seeking advice from prudential regulators or undergoing the requisite notice-and-comment procedure has caused disagreement. Flood stressed the necessity for Congress to exert its authority in preventing potential regulatory overreach.
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