A bipartisan group in the House, led by U.S. Rep. Mike Flood (R-NE), introduced legislation recently that would prohibit certain federal agencies from requiring certain institutions to include assets held in custody as a liability.
The Uniform Treatment of Custodial Assets Act (H.R. 5741) would, in effect, rescind a rule by the Securities and Exchange Commission, Staff Accounting Bulletin 121 (SAB 121), that prevents banks from providing custodial services to digital assets investors by requiring them to keep those assets on the balance sheet.
“The Uniform Treatment of Custodial Assets Act would rescind the SEC’s disastrous SAB 121 and ensure that assets custodied by banks, credit unions and trusts are kept off-balance sheet in line with longstanding practice,” Flood said.
It was also sponsored by Reps. Ritchie Torres (D-NY), French Hill (R-AR), and Wiley Nickel (D-NC).
“Custodial assets should not be listed as a liability on a balance sheet or have an additional capital requirement, simply because they are digital assets,” Torres said. “Regulations like Staff Accounting Bulletin 121 that require different accounting for digital assets put customer assets at risk by discouraging well-regulated custodians from offering custodian services for digital assets. The Uniform Treatment of Custodial Assets Act would make it possible for banks, credit unions, and trust companies to offer safe and well-regulated custodial services for digital assets, without overwhelming additional capital requirements. I am proud to be a part of this bipartisan, common-sense legislation.”
The bill has the backing of several financial industry groups, including the American Bankers Association (ABA), the Bank Policy Institute, and the Securities Industry and Financial Markets Association
“America’s banks have long provided safe and well-regulated custody services to investors for securities and other assets, and The Uniform Treatment of Custodial Assets Act is important to ensuring they can provide their customers with digital asset services in a similarly safe and sound way,” Rob Nichols, ABA president and CEO, said. “Without this legislation, consumers will continue to be left with too few trusted options for digital asset custody services, exposing them to significant risk. We thank Representatives Flood, Hill, Torres, and Nickel for their leadership, and hope this bill will receive prompt consideration and action.”