Providing for Congressional Disapproval of the Rule Submitted By the Securities and Exchange Commission Relating to ``Staff Accounting Bulletin No. 121''--veto Message From the President of the United States

Floor Speech

Mr. Speaker, I rise today in opposition to H.J. Res. 109, which if passed would undermine the Securities and Exchange Commission's ability to protect people who buy cryptocurrency.

Today, Republicans want to override President Biden's veto and block the SEC from setting accounting standards for companies that hold digital assets, like crypto, on behalf of their customers. This resolution is part of a long list of efforts by industry and its allies to attack the good work of the SEC, which has made significant progress in protecting investors; maintaining fair, orderly, and efficient markets; and facilitating capital formation.

Preserving the power of the SEC to protect investors and our markets is now more important than ever, especially in light of the recent Supreme Court ruling in Loper v. Raimondo, which, by overturning Chevron deference, has now undermined the authority of the SEC and other Federal agencies.

The SEC staff accounting bulletin, SAB 121, is an informal guidance intended to clarify confusion raised by market participants. One prong of SAB 121 that would be repealed by today's resolution is about giving the public disclosures to increase transparency about these cryptoassets.

This kind of transparency helps prevent the kind of fraud and mishandling of crypto that led to the collapse of companies like FTX and a dozen other crypto firms that were handling and safeguarding customers' assets.

The second part of SAB 121's guidance advises companies to record cryptoassets as liabilities on their balance sheets and to ensure those liabilities correspond to the fair value of the cryptoassets they are obligated to safeguard.

This ensures that the company providing custody has sufficient resources to secure these assets for the users against any loss or misuse. The SEC has explained that this guidance is prudent due to the unique risk and uncertainties associated with cryptoassets. These risks include hacks, theft, and technical failures.

SEC's guidance simply says a firm that safeguards cryptoassets on behalf of customers should account for these unique crypto risks by recording these assets on its balance sheet as a liability. These safeguards would be completely undermined by passing H.J. Res. 109.

The crypto industry and its allies have long chided the SEC for not providing enough clarity over how cryptoassets should be regulated. However, SAB 121 directly addressed industry uncertainty. It is just that the industry didn't like the answer they got.

Should H.J. Res. 109 come into law, it would not only eliminate SAB 121's helpful guidance, but it would also permanently block the agency's ability to do anything substantially similar in this area in the future.

One special interest group representing large custody banks has provided the SEC with targeted modifications to SAB 121, which would avoid the sledgehammer effect of this legislation. I understand that the SEC may be close to reaching an agreement on these modifications, which would ensure that well-regulated entities, like custody banks, can offer crypto custody services consistent with SAB 121. Nevertheless, despite the fact that this issue will soon be moot, Republicans are pushing ahead anyway with this blunt and overly broad approach.

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Ms. WATERS. If I may respond to the gentleman.

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Ms. WATERS. As I said when I made the presentation, they are close to working out the deal with SAB and the custody bank.
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Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, no matter what is said, this is about overriding the President's veto. My colleagues argue that SAB 121 undermines the investor protection by discouraging crypto firms and other entities from providing custody services.

However, the numbers show this couldn't be further from the truth. According to figures provided by SEC staff, at least 10 U.S. firms are already offering SAB 121-compliant crypto safeguarding services. As of the end of last year, they were safeguarding close to $210 billion worth of crypto assets in a SAB 121-compliant way.

This just goes to show, despite all of the talk, that SAB 121 will lead to less companies wanting to safeguard crypto assets. There are, indeed, plenty of firms out there that are doing so in compliance with this staff accounting bulletin.

Madam Speaker, I yield 1 minute to the gentleman from California (Mr. Sherman).

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Ms. WATERS. Madam Speaker, I yield myself the balance of my time to close.

Madam Speaker, I strongly urge my colleagues to vote ``no'' on this effort to override the President's veto of H.J. Res. 109. If passed, Congress would block the SEC from providing much-needed and timely clarity to our markets.

We would also be preventing the SEC from ensuring companies that hold crypto on behalf of Americans take the necessary care to ensure those holdings are transparent and accounted for.

For all of the handwringing about the lack of regulatory clarity in the crypto space, it is baffling to me how the industry wants to make it harder for the SEC to use one of the primary mechanisms it has to provide clarity around crypto: Staff guidance and accounting bulletins.

H.J. Res. 109 is a sledgehammer when what may be needed to address concerns is a scalpel. CRA resolutions, as these are referred to, not only overturn the agency guidance that is the subject of the resolution, but also prevents the SEC from issuing any substantially similar guidance in the future. In essence, even if the SEC wanted to offer clarity around crypto custody in the future, they would no longer be able to do so.

If Republicans want to address the issue previously raised by custody banks, Members could have done that, but now my colleagues have put forth a bill that causes broad harm not only to the SEC, but all the people and companies that rely on the agency to maintain safety and stability.

Madam Speaker, I call on all of my colleagues to vote ``no'' on this dangerous measure, and I yield back the balance of my time.

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