Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, took to the House floor to oppose the override of President Biden’s veto of H.J.Res.109, a harmful bill aimed at reducing the Securities and Exchange Commission’s ability to protect consumers who buy cryptocurrency.
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 or 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 One prong of SAB 121 that would be repealed by today’s resolution is about giving the public disclosures to increase transparency about these crypto assets. 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 crypto assets as liabilities on their balance sheets and to ensure those liabilities correspond to the fair value of the crypto assets 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 risks and uncertainties associated with crypto assets. Those risks include hacks, theft, and technical failures. SEC’s guidance simply says a firm that safeguards crypto assets 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 crypto assets should be regulated; however, SAB 121 directly addressed industry uncertainty—it’s just that the industry didn’t like the answer they got. Should H.J. Res. 109 become law, it would not only eliminate SAB 121’s helpful guidance, but it also would 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.
I urge my colleagues to oppose this veto override, and I reserve the balance of my time.
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