Fed Chairman reiterates: Custodial assets are not part of the balance sheet
On Wednesday, Federal Reserve Chairman Jerome Powell testified before the US House Financial Services Committee, where Congressman Josh Gottheimer asked him about the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) 121. The bulletin requires banks to include custodied digital assets on their balance sheets, significantly increasing the cost of providing digital asset custody services.
Gottheimer quoted Powell's previous statement: custodied assets do not belong on the balance sheet, and they never have.
Powell generally confirmed this stance but did not comment on the Securities and Exchange Commission's policy, stating that it is within their jurisdiction.
Critics argue that SAB 121 weakens banks' ability to provide secure digital asset custody and pushes these services towards less regulated entities, increasing consumer risk. Lawmakers have proposed overturning SAB 121 due to its negative impact. Although the US Congress passed the first independent cryptocurrency legislation to overturn SAB 121, President Biden vetoed the bill, emphasizing the need to establish a regulatory framework for digital assets.
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