Congressman Flood Leads the Uniform Treatment of Custodial Assets Act with Bipartisan Support

WASHINGTON, D.C. – Today, U.S. Congressman Mike Flood (R-NE), Congressmen Ritchie Torres (D-NY), Congressman French Hill (R-AR), and Congressman Wiley Nickel (D-NC)introduced the Uniform Treatment of Custodial Assets Act. The bill would prohibit certain federal agencies from requiring certain institutions to include assets held in custody as a liability, and for other purposes.

“The SEC’s Staff Accounting Bulleting 121 (SAB 121) would prevent banks from providing custodial services to digital assets investors by requiring them to keep those assets on-balance sheet.” said Rep. Flood. “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. Thank you to Congressman Torres, Congressman Hill and Congressman Nickel for stepping up to provide bipartisan support for this important legislation.”

"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,” said Rep. Torres. “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."

“Holding reserves against assets held in custody is not standard industry practice, but this is exactly what the SEC expects from companies who custody digital assets,” said Rep. Hill. “I am proud to cosponsor the Uniform Treatment of Custodial Assets Act with Reps. Flood and Torres, which would rescind the SEC's terribly misguided SAB 121.”

“I’m excited to work with Congressman Flood, Congressman Hill, and Congressman Torres on this bipartisan legislation to remedy the Securities and Exchange Commission’s misguided approach on digital assets,” said Rep. Nickel. “The Uniform Treatment of Custodial Assets Act will help ensure that banks are able to safely offer digital asset custody services. In doing so, we can help to keep the digital assets industry in the United States, bolster American competitiveness, and put proper protections in place for investors.”

The full bill can be found here. Statements of support from Members of Congress and other stakeholders are included below.

American Bankers 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,” said Rob Nichols, ABA president and CEO. “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.”

Securities Industry and Financial Markets Association (SIFMA): “SIFMA applauds the introduction of the Uniform Treatment of Custodial Assets Act, which would provide greater regulatory clarity around the custody of digital assets and address the capital treatment of digital assets held in custody in the wake of the SEC’s problematic Staff Accounting Bulletin No. 121 (SAB 121). SAB 121 requires financial institutions acting as a custodian to record a liability on their balance sheet in the amount equal to the digital assets under custody, which not only deviates from the existing accounting treatment of assets held in custody, but would limit the ability of retail investors to safely custody their digital assets given the punitive capital impact would be incurred by banks as a result of this treatment. 

Kenneth E. Bentsen, Jr., President and CEO of SIFMA: “Banks are already subject to extensive prudential rules and oversight and have deep expertise in providing safe custody of a wide variety of assets. This bipartisan legislation represents a commonsense solution to a problem manufactured by the SEC and would allow banks to provide digital asset-related custody services for their clients.”

Bank Policy Institute: “The legislation would rightfully prohibit the banking agencies and the SEC from requiring regulated banks to include assets held in custody as a liability or to hold additional regulatory capital against those assets, allowing regulated banks to more fully engage in custodying crypto assets. Congress has a critical role to play in the oversight of the emerging digital and crypto assets market and related fintech innovations, and we appreciate Representatives Flood and Torres’s leadership on this issue.” — Greg Baer, BPI President and CEO