Patrick McHenry, chairman of the U.S. House of Representatives Financial Services Committee, and Senator Cynthia Lummis, who drafted cryptocurrency legislation, sent a letter to banking institutions on Thursday asking them how they would handle a controversial announcement from the U.S. Securities and Exchange Commission (SEC) recommending financial Institutions should account for clients’ crypto assets on their own balance sheets.

The letter to the Fed and other U.S. banking institutions criticized the SEC's move last year, known as Staff Accounting Bulletin 121, saying it could "deprive millions of Americans of the safe and secure means of custody of digital assets” as this would force regulated banks to reject crypto asset custody as it is a capital-intensive requirement. "A recent bankruptcy judgment, classifying all of Celsius' clients as unsecured creditors and therefore at the bottom of the queue to recover assets, underscores the law forcing client escrow assets to be placed on their balance sheets," the lawmakers said in their letter. risk.” The letter asked banking institutions what interactions they had with the SEC on this point, and whether the securities regulator’s position conflicted with their own policies.

Fed Chairman Jerome Powell said last year that the central bank was reviewing the SEC's directive on digital assets, which changes the long-standing practice of keeping client assets off financial firms' balance sheets. Prior to yesterday's news, SEC Chairman Gary Gensler said that cryptocurrency exchanges may not be "qualified custodians."