- A recent attempt by Republicans to enable American banks to offer crypto custody services has been blocked by the Democrat-led White House.
- The House of Representatives was preparing to vote on House Resolution 109 (H.J. Res. 109), which aimed to overturn previous regulatory guidance for banks planning to offer crypto custody services.
- However, just hours before the vote, the Biden Administration announced its intention to veto the resolution should it pass through both the House and Senate.
The White House’s decision to block a Republican-led resolution allowing banks to offer crypto custody services could have significant implications for the US crypto banking sector.
A Major Blow To US Crypto Banking
The White House’s statement explained that Staff Accounting Bulletin (SAB) 121, which Republicans were seeking to invalidate, outlines the views of the Securities and Exchange Commission (SEC) on the accounting responsibilities of firms safeguarding customers’ crypto assets. The Office of the President stated that “H.J. Res.109 would disrupt the SEC’s work to protect investors in crypto-asset markets and to safeguard the broader financial system.” The President would veto H.J. Res. 109 if it were presented to him.
Understanding SAB 121
Mike Flood (R-Nebraska), the sponsor of the act, argued that the SEC did not consult the appropriate Federal banking agencies before publishing SAB 121, bypassing the traditional rulemaking process. Critics have described the bulletin as a disguised “rule” rather than “guidance,” claiming it is prohibitive to banks aiming to realistically launch crypto custody services. Financial Services Committee chair Patrick McHenry stated that “SAB 121 requires financial institutions and firms that are safeguarding their customers’ digital assets to hold those assets on their balance sheet, making it cost prohibitive to do so.”
Conclusion
The blocking of this resolution by the White House is a significant setback for the US crypto banking sector. It remains to be seen how this will impact the future of crypto custody services in American banks and the broader financial system.
