Dear Senator Lummis:
On behalf of the Securities Industry and Financial Markets Association and the Bank Policy Institute, we thank you for your continued focus and Congressional oversight of the emerging digital and crypto assets market and related fintech innovations. Our members believe policy makers, including Congress, have a critical role to play in developing a regulatory framework for these emerging market products. Following the lead of you and other Members of Congress, the Administration has issued an executive order directing federal prudential and market regulators to undertake a “whole of government” review of the digital and crypto market and make policy recommendations. Any such recommendations will ultimately and appropriately be subject to Congressional oversight and consideration. As such, it is important that policy makers carefully consider every aspect of this emerging market including investor and consumer protections and the role of federal regulators. Such review should consider the interrelated nature of the U.S. financial regulatory structure to avoid conflicts or unintended consequences and provide for ample stakeholder engagement.
To that end, we are concerned that a recent Securities and Exchange Commission (SEC) staff accounting interpretation affecting the treatment of crypto-assets held in custody by public companies, including regulated banks, raises significant process, policy, and related concerns. Given the lack of stakeholder engagement, the apparent conflict with other financial rules affecting regulated banks, and the aforementioned Executive Branch review of the emerging market, for reasons we discuss herein, our members believe the SEC should exempt regulated banks from recording a liability and corresponding asset on their balance sheets at fair value for accounting purposes for crypto-assets held in custody, while applying disclosure requirements regarding these assets; or, at a minimum, immediately delay the implementation of Staff Accounting Bulletin 121 (SAB 121) so that Congress, the SEC, other federal regulatory agencies, and public stakeholders can thoughtfully consider the implications of SAB 121, including possible negative collateral consequences.
To read the full congressional letter, click here, or click on the download button below.