Today the U.S. Senate voted for a bipartisan resolution to overturn the Securities and Exchange Commission’s (SEC) SAB 121, the staff accounting bulletin that makes it prohibitive for banks to offer digital asset custody services. This follows a similar Congressional vote last week. Today’s resolution was passed with 60 votes in favor and 38 against. That included the Democrat Senate majority leader Chuck Schumer voting in favor. His vote could prove important because last week, the White House vowed to veto the resolution if it were presented to the President.
The accounting rule requires listed firms, including banks to include assets under custody as both an asset and liability on their balance sheets. Usually these assets don’t go on the balance sheet because they belong to the client. Given bank capital requirements are based on their balance sheets, this means banks need to set aside huge amounts of capital to provide digital asset custody. It’s the reason why no banks provide custody for the Bitcoin ETFs.
The Government Accountability Office (GAO) determined that SAB 121 warranted a Congressional review. Apparently the SEC also did not consult with banking regulators before issuing the accounting bulletin.
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