Yesterday the House of Representatives failed to overturn a Presidential veto relating to SAB 121, an SEC accounting rule that prevents banks from providing digital asset custody. While a majority voted in favor, 228 versus 184, it requires two thirds to override a presidential veto. Hence, the SEC accounting rule still stands. However, on Wednesday Representative Maxine Waters said the SEC was considering changes to address bank concerns.
According to Ms Waters, the ranking Democrat on the House Financial Services Committee, the SEC may be close to an agreement on modifications with custody banks, “which would ensure that well-regulated entities like custody banks can offer crypto custody services consistent with SAB 121”. This was news to Patrick McHenry, the Chair of the same committee.
The crux of the problem is the accounting rule forces assets under custody to be disclosed as both an asset and liability on the balance sheet, contrary to accounting convention.
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