McHenry Delivers Remarks on the House Floor in Support of Resolution to Overturn SEC's SAB 121

Washington, May 8, 2024 -

Today, the Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), delivered remarks on the House floor in support of H.J.Res. 109, "Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to 'Staff Accounting Bulletin No. 121.'"

H.J.Res. 109 overturns the SEC's SAB 121 under the Congressional Review Act (CRA). By overturning SAB 121, the bipartisan resolution ensures consumers are protected by removing roadblocks that prevent highly regulated financial institutions and firms from acting as custodians of digital assets.

Watch Chairman McHenry's remarks here or by clicking the image above.

Read Chairman McHenry's remarks as prepared for delivery:

"This bipartisan resolution is an essential effort to protect consumers and foster innovation in digital asset markets. It's also critical to stop the SEC's regulatory power grabs and efforts to circumvent the Administrative Procedure Act.

"I want to thank my friend Congressman Flood-a leader on financial innovation and digital asset policy-for introducing this bipartisan resolution.

"Staff Accounting Bulletin, or SAB, 121 is one of the most glaring examples of the regulatory overreach that has defined Gary Gensler's tenure at the SEC.

"Through SAB 121, the Commission is trying to dictate how financial institutions and firms safeguard Americans' digital assets under the guise of so-called staff guidance.

"Let me explain why this is deeply concerning.

"Because they called it staff guidance, the SEC could avoid public comment and the rulemaking process governed by the Administrative Procedure Act or APA.

"Not only did the SEC bypass Congress and the Comptroller General, but the Commission did not even consult with the prudential regulators responsible for overseeing banks prior to issuing SAB 121.

"Thanks to the work of the House Financial Services Committee and my friend Senator Lummis, the GAO rightly deemed SAB 121 a rule for purposes of the Congressional Review Act-providing Congress with the opportunity to right this wrong.

"SAB 121 requires financial institutions and firms that are safeguarding their customers' digital assets to hold those assets on their balance sheet.

"That means banks would be required to take on significant capital, liquidity, and other costs under the existing prudential regulatory framework.

"This essentially makes it cost prohibitive for financial institutions to custody their customers' digital assets.

"This is a massive deviation from how highly regulated banks are traditionally required to treat the assets they hold on behalf of their customers.

"Let's be clear, this change is not for the better.

"It limits the options for consumers and increases concentration risk. Perhaps even worse, it could leave Americans' assets vulnerable in the event of a bank failure as we saw with SVB last year.

"If you want Americans to be able to engage with digital assets safely and securely, banks-which are some of the most regulated businesses in our country-are probably the best way.

"Unfortunately, SAB 121 makes that nearly impossible. We hear a lot from our Democrat colleagues about consumer protection. If that concern is genuine, they should support Congressman Flood's bipartisan resolution.

"Let me give you one example of why the guidance is problematic. The SEC recently approved 11 Bitcoin ETFs, which allow everyday investors to gain exposure to this technology.

"Of those 11, zero-I repeat zero-use banks as their primary custodian. Instead, all of that risk is now concentrated.

"Let's do a quick recap: the SEC, through Staff Accounting Bulletin 121, has upended traditional custody practices for banking institutions, made a joke out of our rulemaking process, and ignored other regulatory agencies and market participants that are impacted by this Bulletin.

"That's bad process and even worse policy.

"So, if you want consumers to be protected in digital asset markets-vote YES.

"If want to return bank custody practices to the tried, tested, and successful approach-vote YES.

"If you support financial innovation-you should vote YES.

"And finally, if you want to send a message that rogue regulators cannot circumvent Congress and our well-established rulemaking process-vote YES.

"Let's bring commonsense into our digital asset policy by passing this bipartisan, pro-consumer CRA resolution.

"I again thank Congressman Flood, as well as Congressman Nickel, for their leadership."

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