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Ranking Member Waters Statement on Resolution to Overturn SEC’s Guidance on Crypto Assets: H.J. Res. 109 “Would Have Broad and Negative Consequences for All Public Companies and Their Investors, with Implications for the Entire Securities Market, Not Just Crypto.”

Today Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, took to the House floor to deliver remarks on H.J. Res. 109, a Congressional Review Act resolution that would overturn accounting guidance for crypto assets from the Securities and Exchange Commission (SEC), known as Staff Accounting Bulletin 121, or SAB 121.

Mr. Speaker, I yield myself such time as I may consume.

I rise in strong opposition to H.J. Res. 109, a Congressional Review Act resolution that would overturn accounting guidance for crypto assets from the Securities and Exchange Commission, known as Staff Accounting Bulletin 121, or SAB 121. The bill sponsors have falsely asserted that this bill is meant to address a narrow concern from a particular special interest group, but in reality, it is drafted in a way that is far broader than this narrow concern. The collateral damage caused by this CRA resolution would be far reaching, causing significant harm to investors, consumers, public companies, and the safety and soundness of our capital markets.

This bill takes a sledgehammer to fix an issue that may merely need a scalpel, and it does so because my colleagues on the other side of the aisle are not only interested in doing the bidding of special interest groups, they are also interested in attacking and undermining the SEC in every possible way, as they have done relentlessly since the beginning of this Congress.

SAB 121 is highly technical guidance, but let me break it down simply. SAB 121 has been in place for two years and it only applies to companies that hold crypto assets on behalf of their customers. This is known as providing custody services. SAB 121 provides guidance for these companies in two respects: first, it advises companies on how they should disclose the crypto assets that they custody; and second, it advises companies on how they should record those crypto assets on their balance sheets.

The first prong of the guidance I described on disclosure of crypto assets is critical to providing transparency for investors and the public on volatile crypto assets. This kind of transparency helps prevent the kind of fraud and mishandling of crypto assets that led to the collapse of major crypto companies like FTX. In fact, this disclosure guidance has been broadly supported by industry and advocate stakeholders alike.

The second prong of SAB 121 advises relevant companies on how to record crypto assets on their balance sheets. Under the guidance, the amount of the liability should correspond to the fair value of the crypto assets they are obligated to safeguard. This ensures that the company providing custody services has sufficient resources to secure these assets for the users against any theft, loss, or other misuse that could result in financial consequences. The SEC has explained that this guidance is prudent due to the unique risks and uncertainties associated with crypto assets.

So the sponsor of this resolution has tried to reason that this bill is meant to respond to a narrow concern from large custody banks, but it really has much more far-reaching negative consequences. Specifically, this special interest group has raised concerns that the second prong of SAB 121 that I described on accounting mechanisms would interact with existing bank capital requirements in a way that would absolutely make it cost prohibitive for them to provide custody services for crypto assets.

To be clear, even this special interest group has expressed support for the disclosure guidance in SAB 121. They are only concerned about how the accounting guidance applies to their balance sheet. In fact, a letter sent by this special interest group requests quote “targeted modifications” unquote to address this concern. Mr. Speaker, I ask unanimous consent to submit this letter for the record.

But this bill does far more than implement “targeted modifications” as this letter proposes. This CRA resolution would overturn ALL of SAB 121, not just the part that this special interest group has complained about. So, Mr. Speaker, I am curious whether my colleagues on the other side of the aisle have actually read this letter from the special interest group that they are trying to pander to, or whether they bothered to consult the largest custody bank in the U.S. — the Bank of New York Mellon, which custodies more than $45 trillion in customer assets. Because they told me that they do not want this CRA, and did not push for it in any way because they share our concerns about the bill being overly broad.

The consequences of using a CRA, rather than a more narrowly tailored bill, go beyond simply overturning SAB 121 entirely when the aforementioned concerns from special interests only have to do with one piece of it. If this resolution is passed, the SEC would be prohibited from issuing any guidance in the future that is substantially similar to this one, including disclosure guidance on this issue. This means that the SEC would not be able to simply turn around and narrowly address this one concern while preserving the rest of the guidance. It also means that while the crypto industry clamors for the SEC to provide more clarity, this resolution would tie the SEC’s hands, making it harder for them to provide the clarity the industry purportedly wants.

I am further concerned that if this resolution is passed, industry and investors alike will no longer be able to receive timely guidance from SEC staff, as this resolution is also intended to be a warning. Passing this resolution would have broad and negative consequences for all public companies and their investors, with implications for the entire securities market, not just crypto.

The SEC has issued numerous Staff Accounting Bulletins—the one being repealed today is number 121-- that have helped companies understand how SEC rules apply in specific situations. If the SEC were to pull back in this regard, it would be particularly harmful to smaller companies with less resources dedicated to compliance, and could result in more enforcement actions as they struggle to understand how to best comply with SEC rules.

Chair McHenry and I have worked well together to find common ground on crypto issues like stablecoins. However, instead of finding ways to work together, Republicans are recklessly pushing this harmful, partisan resolution.

Let us not forget SEC is our cop on the block and should be supported because they protect our investors, so I urge my colleagues to oppose this bill, and I reserve the balance of my time.


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