Recent developments in the House Appropriation budget may prevent the US Securities and Exchange Commission (SEC) from implementing the controversial Staff Accounting Bulletin 121 (SAB 121). This budget has raised concerns about the future of SAB 121, which requires financial institutions and other firms to record digital assets on their balance sheets.
The House Appropriation budget includes a policy rider that specifically prohibits the SEC from implementing or enforcing SAB 121. With a Republican majority in the House, the bill is expected to pass in a June 5 hearing. However, the Senate, which has a Democratic and Independent majority, will have to negotiate its own appropriation bill against the House’s version.
SEC commissioner Mark Uyeda and fellow commissioner Hester Peirce have both expressed concerns about the process through which SAB 121 was introduced. They criticized the use of a regulatory edict to implement the rule, bypassing the rulemaking procedures under the Administrative Procedure Act (APA). Uyeda called this process an “overreaching administrative state” that undermines the system of checks and balances.
SAB 121 has faced opposition not just in terms of the process but also due to its potential financial impact on companies. The requirement to record digital assets on balance sheets could impose high capital and liquidity costs on financial institutions and other firms. This financial burden has been a central concern for opponents of SAB 121.
The House and Senate previously voted to pass H.J. Res. 109, which aimed to overturn SAB 121. However, President Joe Biden vetoed the resolution on May 31, citing concerns about the potential risks to consumers and investors. The veto received pushback from House lawmakers and industry groups who urged Biden to reconsider.
The future of SAB 121 remains uncertain as the House Appropriation budget could prevent the SEC from implementing the rule. The disagreement between House and Senate members, as well as the differing views on the financial impact of SAB 121, highlight the complexity of regulatory issues in the financial sector. Stay tuned for further developments on this issue as it continues to unfold.
