Lummis, McHenry Send Letter Seeking Clarity on Digital Asset Accounting Regulations

March 2, 2023

Letter requests federal banking agencies to assess impact of SAB 121 on consumer protection

WASHINGTON, D.C. – U.S. Senator Cynthia Lummis (R-WY) and Chairman of the House Financial Services Committee Patrick McHenry (R-NC-10) sent a letter to the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the National Credit Union Administration requesting those agencies assess the impact of Staff Accounting Bulletin 121 (“SAB 121”) on consumer protection, bankruptcy risk and the capital levels of both banks and credit unions.

The letter reads, “Since SAB 121 purports to require banks, credit unions and other financial institutions to place digital assets on their balance sheets, it would trigger a massive capital charge. … In sum, the effect of SAB 121 is to deny millions of Americans access to safe and secure custodial arrangements for digital assets.”

The letter also highlights the increased bankruptcy risk from placing custodial assets on balance sheet, as demonstrated by the recent decision in the Celsius bankruptcy that could result in near-total losses for hundreds of thousands of Americans.

SAB 121 was issued by the Securities and Exchange Commission (SEC) on April 11, 2022. It was intended to clarify the treatment of digital assets for SEC reporting companies, including banks, credit unions and other financial institutions, but instead has created greater risk in the system and will lead to prohibitive capital costs, harming consumer protection at a time when Americans need well-regulated options for digital asset custody.

Read the full text of the letter here