House Votes 228–182 to Reject SEC Crypto Custody Bulletin

The U.S. House of Representatives voted 228–182 on May 8, 2024, to pass H.J.Res. 109, a Congressional Review Act resolution seeking to invalidate the Securities and Exchange Commission’s Staff Accounting Bulletin No. 121.

The House clerk recorded the vote at 5:49 p.m. Eastern. All 207 Republicans who voted supported the resolution, as did 21 Democrats; 182 Democrats opposed it and 19 representatives did not vote. That bipartisan margin sent the measure to the Senate but did not rescind the bulletin or change any company’s accounting obligations on May 8.

The vote mattered because SAB 121 sat at the intersection of crypto custody, financial reporting and regulated institutions’ ability to participate in digital-asset markets. It also forced Congress to consider whether the SEC had established consequential policy through staff accounting guidance without using a conventional notice-and-comment rulemaking process.

What SAB 121 required

SEC staff issued SAB 121 on March 31, 2022, with an effective date of April 11, 2022. It applied to specified SEC-reporting entities with obligations to safeguard crypto assets held for platform users, including arrangements involving cryptographic keys maintained by the entity or its agent.

The bulletin said a covered entity should recognize a liability reflecting its obligation to safeguard users’ crypto assets. That liability was initially measured at the fair value of the safeguarded assets. The entity also recognized a corresponding asset at the same initial amount, with subsequent measurement adjusted for loss events where applicable.

SEC staff attributed this treatment to technological, legal and regulatory risks it considered different from those associated with conventional custody. The bulletin also called for disclosures about the nature and amount of safeguarded crypto assets, concentrations, key-management responsibilities and vulnerabilities involving loss, theft, fraud or bankruptcy.

Opponents argued that the balance-sheet treatment could interact with bank capital and liquidity requirements, making large-scale crypto custody uneconomic for regulated banking organizations. That was a contemporaneous policy and industry claim, not a quantified effect established by the May 8 roll call. The House vote did not determine how the treatment affected any particular institution.

Accounting guidance became a procedural dispute

The Government Accountability Office concluded on October 31, 2023, that SAB 121 qualified as a rule for Congressional Review Act purposes and was therefore subject to the act’s submission requirement. GAO reported that the SEC had not submitted the required report to Congress or the comptroller general.

The SEC had argued that the bulletin was not an agency rule of future effect and did not create new rights or obligations. GAO disagreed for purposes of the Congressional Review Act. Its decision did not itself rescind SAB 121 or decide every question about the bulletin’s legal status; it provided the procedural basis for lawmakers to pursue a resolution of disapproval.

H.J.Res. 109 would leave SAB 121 with no force or effect only if the resolution completed the legislative process and became law. The Biden administration issued a statement on May 8 opposing the measure and promising a presidential veto. It defended the bulletin as a response to demonstrated crypto-asset risks and warned that a Congressional Review Act resolution could constrain the SEC’s ability to address related future issues.

The event-day limit

At the close of May 8, the verified development was a House rebuke of the SEC’s custody-accounting position—not a completed repeal. SAB 121 remained operative, the Senate had not yet voted, and the president had not received the resolution.

The vote nevertheless showed that opposition extended beyond the House Republican majority. Its institutional significance was the 21 Democratic votes joining 207 Republicans to move a direct challenge to SEC crypto policy into the Senate despite an announced veto threat.