SE Wyoming News

Today, U.S. Senator Cynthia Lummis, alongside Reps. Wiley Nickel and Mike Flood, introduced a bipartisan, bicameral Congressional Review Act resolution to overturn the U.S. Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) 121. This accounting bulletin has serious implications for consumers and banks, as it confuses the distinction between customer assets and bank assets, posing a threat to the foundation of essential custody services and increasing bankruptcy risk for consumers.

The introduction of this resolution comes after the Government Accountability Office (GAO) found that SAB 121 is a rule for purposes of the Congressional Review Act. The GAO's decision confirms that the SEC should have sought public comment before issuing this legally binding directive.

In response to the introduction of the resolution, Senator Lummis expressed her concerns about the impact of SAB 121 on consumer protection and the ability of well-regulated financial institutions to provide safe custody for Americans' financial assets. She stated, "SAB 121 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."

Representative Nickel also criticized the SEC's approach on digital assets and emphasized the need for Congress to intervene. He said, "Gary Gensler and the Security and Exchange Commission continue to overstep their authority, and it's time for Congress to weigh in on Staff Accounting Bulletin No. 121. I'm proud to lead this bipartisan, bicameral effort with Senator Lummis and Congressman Flood pushing back against the SEC's untenable approach on digital assets."

Representative Flood highlighted the SEC's failure to consult with prudential regulators and undergo the notice-and-comment process before issuing SAB 121. He emphasized the role of Congress in serving as a check on regulatory overreach and stated, "In the face of overreach by a regulator, it is the role of Congress to serve as a check. I am proud to jointly introduce a bipartisan resolution of congressional disapproval with Senator Lummis and Congressman Nickel to fulfill that role."

Several industry organizations have expressed their support for the resolution, citing concerns about the impact of SAB 121 on the banking industry's ability to provide safe custody of digital assets. Rob Nichols, President and CEO of the American Bankers Association, stated, "The SEC's Staff Accounting Bulletin 121 represents a significant departure from longstanding accounting treatment for custodied assets and threatens the banking industry's ability to provide its customers with safe and sound custody of digital assets."

The resolution introduced by Senator Lummis and Representatives Nickel and Flood has garnered praise from various organizations. Paige Paridon, Senior Vice President and Senior Associate General Counsel of the Bank Policy Institute, expressed gratitude for their work in opposing SAB 121. She stated, "BPI's initial concerns that this would preclude highly regulated U.S. banking organizations from providing a custodial solution for digital assets at scale have been confirmed."

Kevin Fromer, President and CEO of the Financial Services Forum, commended the introduction of the resolution and emphasized the importance of rescinding the policy imposed by SAB 121. He said, "The result is that digital asset custodial services are currently offered by a multitude of non-banking organizations, keeping the activity outside the prudential perimeter and outside of banks with comprehensive and robust risk management practices, thus increasing risks for customers."

Kenneth E. Bentsen, Jr., President and CEO of the Securities Industry and Financial Markets Association, also expressed support for the resolution, highlighting the need for the regulatory process to be deliberate and comprehensive. He stated, "SAB 121's requirement for balance sheet recognition deviates from current accounting treatment for traditional assets held in custody, which are not required to be recorded on a firm's balance sheet. Because of its impact on bank capital and liquidity ratios, SAB 121 has disincentivized banks from providing custodial services for digital assets."

This resolution follows a previous letter sent by Senator Lummis, Representative Nickel, and Representative Flood, alongside other lawmakers, to the prudential regulators urging them to clarify that SAB 121 is not enforceable. The introduction of the resolution demonstrates their continued efforts to address the concerns surrounding SAB 121 and restore the ability of banks to provide custodial services for digital assets in a highly regulated and safe manner.

In conclusion, the introduction of the bipartisan, bicameral Congressional Review Act resolution by Senator Lummis, Representative Nickel, and Representative Flood seeks to overturn the SEC's Staff Accounting Bulletin 121, which has raised concerns about the distinction between customer assets and bank assets. The resolution has garnered support from industry organizations, highlighting the potential risks and impact of SAB 121 on the banking industry's ability to provide safe custody of digital assets.