- Pro-crypto Republicans are challenging the U.S. Securities and Exchange Commission (SEC) over its guidance on crypto custody services.
- The House of Representatives will vote on a resolution expressing disapproval of the SEC’s Staff Accounting Bulletin (SAB) 121.
- Rep. Mike Flood (R-Nebraska) and other critics argue that the SEC’s guidance discourages banks from offering crypto custody services and is an overreach of regulatory authority.
Republicans are taking aim at the U.S. Securities and Exchange Commission (SEC) over its guidance on crypto custody services, arguing it discourages banks from offering these services and represents an overreach of regulatory authority.
Republicans Challenge SEC’s Crypto Guidance
Pro-crypto Republicans are preparing to challenge the U.S. Securities and Exchange Commission (SEC) this week, demanding that the agency rescind its current guidance that they say discourages banks from offering crypto custody services. On Wednesday, the House of Representatives will vote on Rep. Mike Flood’s (R-Nebraska) joint resolution to lodge congressional disapproval of Staff Accounting Bulletin (SAB) 121. A companion resolution was introduced in the Senate.
Controversy Over SAB 121
SAB 121—published on the SEC website—outlines the opinions of SEC staff about the risks crypto custodians should consider and lays out the related disclosure requirements under federal securities laws. While the SEC positions SABs as guidance rather than formal rules, Flood argued on Monday that SAB 121 represents “both a change in policy and a change that’s controversial.” He said the SEC also bypassed the traditional SAB development process, which usually involve consultation with Federal banking agencies.
Impact on Crypto Custody Services
Within SAB 121, the SEC warns of “technological,” “legal,” and “regulatory” risks unique to crypto-custodians, claiming they could have a “significant impact on the entity’s operations and financial condition.” Flood blames warnings like this for keeping banks and broker-dealers away from safeguarding crypto assets like other financial assets—even four months after the agency’s approval of Bitcoin spot ETFs.
Conclusion
The ongoing debate over the SEC’s guidance on crypto custody services underscores the broader tensions between regulators and the crypto industry. As the resolution moves forward, it will be important to watch how lawmakers and the SEC navigate these issues in order to strike a balance between regulatory oversight and fostering innovation in the crypto space.
