Congressman Patrick McHenry, Chair of the House Financial Services Committee, and Senator Cynthia Lummis, have co-authored a letter addressed to federal regulators demanding regulatory clarity on digital assets.
Both elected officials are known for their support of Fintech innovation. Lummis has co-authored legislation aiming to create rules for digital assets. McHenry’s Committee is known to be working on various bills designed to provide consumer protections within the crypto sector while enabling innovation.
The letter has been sent to the US Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the National Credit Union Administration following up on a letter seeking clarification on Staff Accounting Bulletin 121 (SAB 121), which changed the way banks and financial institutions are expected to account for the custody of digital assets.
The letter states that:
“SAB 121 was intended to clarify the accounting treatment of digital assets safeguarded by custodians, exchanges, and other platforms engaged in digital asset activities. However, SAB 121 places customer assets at greater risk of loss if a custodian becomes insolvent or enters receivership, violating the SEC’s fundamental mission to protect customers.”
Additionally;
“Since SAB 121 purports to require banks, credit unions and other financial institutions to effectively place digital assets on their balance sheets, it would trigger a massive capital charge. This, in turn, is likely to prevent these prudentially regulated entities from engaging in digital asset custody. To the contrary, we should be encouraging prudentially regulated financial institutions, like banks and credit unions, to provide digital asset services precisely because they are subject to the highest standards of capital, liquidity, recovery and resolution, custody, cyber-security, and risk management.”
The two officials state that SAB 121 will deny secure custody for digital assets for millions of Americans. It requests response to a series of questions by no later than March 16, 2023.