Patrick McHenry

Mr. McHENRY

Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of this bipartisan resolution of disapproval. This resolution is an essential effort to protect consumers and foster innovation in digital asset markets. It is also critical to stop the Securities and Exchange Commission's regulatory power grabs and efforts to circumvent the Administrative Procedure Act. I thank my friend Congressman Flood of Nebraska, a leader on financial innovation and digital asset policy, for introducing this bipartisan resolution. Staff Accounting Bulletin 121, or SAB 121, is one of the most glaring examples of the current Securities and Exchange Commission's reign of overreach. Through SAB 121, the Commission is trying to dictate how financial institutions and firms safeguard Americans' digital assets, in particular here, digital assets, under the guise of so-called staff guidance. Let me explain why this is deeply concerning. Because they call it a staff guidance, the Securities and Exchange Commission could avoid public comment and the rulemaking process governed by the Administrative Procedure Act, or APA. This is where the public gets to give an opinion back or expertise back to the agency so they can improve the rulemaking by listening to the public. This is a longstanding process here in the United States. Not only did the Securities and Exchange Commission bypass Congress and the Comptroller General, but the Commission did not even consult with other financial regulators, prudential regulators responsible for overseeing banks prior to issuing SAB 121. Thanks to the work of the House Financial Services Committee and my friend Senator Lummis, the GAO rightly deemed SAB 121 a rule for purposes of the Congressional Review Act, providing Congress with the opportunity to right the wrong of the agency action. SAB 121 requires financial institutions and firms that are safeguarding their customers' digital assets to hold those assets on their balance sheet. That means banks would be required to take on significant capital liquidity and other costs under the existing prudential regulatory framework. This essentially makes it cost prohibitive for financial institutions to custody their customers' digital assets. This is a massive deviation for how highly regulated banks are traditionally required to treat assets they hold on behalf of their customers. Now, this is the point that everyone can understand. This is a change that harms consumers and makes them less protected. It is not a change for the better, clearly. It limits the options for consumers and increases concentration risk to the financial system. Perhaps even worse, it could leave Americans' assets vulnerable in the event of a bank failure, just as we saw with Silicon Valley Bank last year. If you want Americans' assets to be protected, they should be held in custody, not on a bank balance sheet. If you want Americans to be able to engage with digital assets safely and securely, banks, which are some of the most highly regulated entities in our country and in the world, are probably the best places for them to be kept. Unfortunately, SAB 121 makes this nearly impossible. We hear a lot from our Democrat colleagues about consumer protection. If that concern is genuine, and I think it is, they should support Congressman Flood's bipartisan resolution before us today. Let me give you one example of why this guidance is problematic. The Securities and Exchange Commission recently approved 11 Bitcoin ETFs, which allow everyday investors to gain exposure to this new technology. It is a decade old, but it is relatively new. Of those 11, zero--and I repeat, zero--use banks as their primary custodian. Instead, all that risk is now concentrated in a few entities. Let's do a quick recap. The Securities and Exchange Commission through Staff Accounting Bulletin 121 upended traditional custody practices. Just like you hold a stock with a stockbroker, it is held in custody. That means if that entity goes bankrupt, your asset is still protected. It is held in custody and safeguarded as if it is in a safe. We want digital assets to be treated the same way that we treat other assets and be protected. This staff accounting bulletin upends traditional custody practices for banking institutions and makes a joke of the rulemaking process and ignores other regulatory agencies and market participants that are impacted by this bulletin. That is a bad process with even worse policy outcomes. If you want consumers to be protected in digital assets markets, vote ``yes'' on this resolution. If you want to return bank custody practices to the tried, tested, and successful approach that we have had in this country for centuries, then vote ``yes.'' If you support financial innovation, you should vote ``yes,'' as well. Finally, if you want to send a message that rogue regulators cannot circumvent Congress and our well-established rulemaking process, vote ``yes.'' Let's bring a level of common sense into the world of the digital asset debate or crypto and bring consumer protection back to this marketplace where it needs to be. I encourage my colleagues to vote ``yes'' on this Congressional Review Act. Finally, I thank Congressman Flood on the Republican side and Congressman Nickel on the Democrat side for their leadership on this important topic. Mr. Speaker, I reserve the balance of my time.

Mr. McHENRY. Mr. Speaker, I yield an additional 30 seconds to the gentleman from Kentucky.

Mr. McHENRY. Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina (Mr. Nickel), my good friend and colleague, and a great leader in digital assets.

Mr. McHENRY. Mr. Speaker, pursuant to House Resolution 1194, I call up the joint resolution (H.J. Res. 109) providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to ``Staff Accounting Bulletin No. 121``, and ask for its immediate consideration in the House.

Mr. McHENRY. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and submit extraneous material on the joint resolution under consideration.

Mr. McHENRY. Mr. Speaker, I include in the Record the Government Accountability Office's October 31, 2023, decision on the ``Applicability of the Congressional Review Act to Staff Accounting Bulletin No. 121,'' which can be found online at: https://www.gao.gov/ assets/870/862501.pdf. The decision makes clear that the accusations that the ranking member is making about how broad this is are simply not the case. It is a very targeted removal of the staff accounting bulletin that broadly affects digital assets, not one bank. Mr. Speaker, I yield 3 minutes to the gentleman from Nebraska (Mr. Flood), the sponsor of the resolution and a leader on innovation on the Financial Services Committee and broader policy.

Mr. McHENRY. Mr. Speaker, I yield an additional 1 minute to the gentleman from Nebraska.

Mr. McHENRY. Mr. Speaker, I would say to my colleagues that if they want to fix the Sam Bankman-Fried FTX fraud and their ability to do that again, then you need to pass the bill that we produced out of committee that regulates crypto and provides regulatory agencies power. Mr. Speaker, I yield 1 minute to the gentleman from Oklahoma (Mr. Lucas), who is the chairman of the Science Committee and a great leader on the Financial Services Committee.

Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentleman from Utah (Mr. Curtis).

Mr. McHENRY. Mr. Speaker, may I inquire as to how much time is remaining.

Mr. McHENRY. Mr. Speaker, I yield 3 minutes to the gentleman from Arkansas (Mr. Hill), my friend and chair of the Digital Assets Subcommittee and the vice-chair of the Financial Services Committee.

Mr. McHENRY. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio (Mr. Davidson), the chair of the Housing Subcommittee, the vice chair of the Digital Assets Subcommittee, and a longtime leader in digital innovation and digital assets.

Mr. McHENRY. Mr. Speaker, my friend says dangerous and reckless. Well, Democrats used the Congressional Review Act process just like Republicans have used the Congressional Review Act process. This is not reckless or dangerous. It is law, and we are trying to be a check and balance on overreach of the administration. Mr. Speaker, I yield 2 minutes to the gentleman from Wisconsin (Mr. Fitzgerald), an esteemed member of the Financial Services Committee and Judiciary Committee.

Mr. McHENRY. Mr. Speaker, may I inquire as to how much time is remaining.

Mr. McHENRY. Mr. Speaker, I am prepared to close, and I reserve the balance of my time.

Mr. McHENRY. Mr. Speaker, I include in the Record a May 7, 2024, letter from the American Bankers Association, Bank Policy Institute, the Financial Services Forum, and the Securities Industry and Financial Markets Association supporting H.J. Res. 109. May 7, 2024. Re Providing for Congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to ``Staff Accounting Bulletin No. 121'' (H.J. Res. 109) Hon. Mike Johnson, Speaker, House of Representatives, Washington, DC. Hon. Hakeem Jeffries, Minority Leader, House of Representatives, Washington, DC. Dear Speaker Johnson and Minority Leader Jeffries: The American Bankers Association, Bank Policy Institute, Financial Services Forum, and Securities Industry and Financial Markets Association (Associations) write to express our support for H.J. Res. 109, the Congressional Review Act resolution of disapproval for the Securities and Exchange Commission's ``Staff Accounting Bulletin 121.'' H.J. Res. 109 was introduced by Reps. Mike Flood (R-NE) and Wiley Nickel (D-NC) and favorably reported by a bipartisan vote from the Financial Services Committee on February 29. The measure is scheduled for consideration by the House this week. In March 2022, the Securities and Exchange Commission's (SEC) Office of the Chief Accountant released Staff Accounting Bulletin (SAB) 121, without consulting the prudential regulators or soliciting public comment, to address perceived risks to publicly traded companies that safeguard digital assets for their customers. Under SAB 121, an entity responsible for safeguarding digital assets for platform users must measure safeguarding assets and obligations on its balance sheet at the fair value of the related assets, which is a departure from accounting standards and the historical practice of treating custodial assets as off-balance sheet. As this effectively treats the custodied assets as those owned by a bank, SAB 121 effectively precludes banks from offering digital asset custody at scale since placing the value of client assets on their balance sheets will impact certain capital, liquidity, and other prudential requirements. Furthermore, SAB 121 undercuts the ability of banks to develop responsible use cases for distributed ledger technology (DLT) and encumbers regulated broker-dealers from custody services as a result of the net capital rule (Rule 15c3-1), which treats the on- balance sheet items as non-allowable assets. On February 14, 2024, the Associations sent a joint letter to the SEC noting that over the past two years SAB 121 has curbed the ability of our member banks to develop and bring to market at scale certain digital asset products and services. This includes spot bitcoin exchange traded products (recently approved by the Commission for investors) and the use of DLT to record traditional financial assets (i.e. tokenization). SAB 121 represents a significant departure from longstanding accounting treatment for custodial assets and threatens the industry's ability to provide its customers with safe and sound custody of digital assets. Other, non- bank digital asset platforms subject to SAB 121 are not required to meet the same capital, liquidity, or other prudential standards as banks and therefore do not face the economically prohibitive implications of SAB 121. Limiting banks' ability to offer these services leaves customers with few well-regulated, trusted options for safeguarding their digital asset portfolios and ultimately exposes them to increased risk. The Associations respectfully request that Members of the House vote in favor of H. J. Res. 109. Sincerely, American Bankers Association, Bank Policy Institutec, Financial Services Forum, Securities Industry and Financial Markets Association.

Mr. McHENRY. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, the administration's approach to digital assets doesn't make a lot of sense. The President has an executive order outlining work products that he wants from agencies. On one hand, they say we want to bring digital assets into regulated finance, and we need clear rules of the road. On the other hand, the administration's appointees at the Securities and Exchange Commission have done everything they can to undermine that level of clarity, that is number one; number two, issuing guidance that undermines whatever the current clarity is and diminishing that; number three, thereby diminishing consumer protection. It is a nonsensical approach. So the administration says they want to veto this resolution. Yet they have a whole workstream the President issued without any forcing mechanism and executive order asking for a regulated stable coin, which we have passed out of the House Financial Services Committee with bipartisan votes. They have asked for a market regulation to give clarity of what is a digital asset, and a means of exchange so American consumers can participate in this innovation that is the basis of the new generation of internet technology that the globe is using and America is behind. I think it is important that we engage, as best we can, whether it is with the stable coin bill that we passed out of committee--the market regulation bill we passed out of committee--that it brings that clarity the President's executive order asked for, and takes this first step to provide consumer protection so that their financial assets are protected. If the firm goes bankrupt, they want to know they can get their asset back. Passing this repeal is the first step in that process. This is very important for consumer protection. If you support consumer protection vote ``yes'' on this resolution. If you support safety and soundness for financial institutions vote ``yes.'' If you support reining in rogue regulators vote ``yes.'' This should be a wide bipartisan vote and a statement that the House supports digital assets, digital innovation, and thoughtful policymaking from our regulators and regulated finance. Mr. Speaker, I urge adoption of this resolution. I also thank my colleagues on the Democrat side, Mr. Nickel, and on the Republican side, Mr. Flood, for their thoughtful approach to policymaking, and digital assets generally, but on developing this Congressional Review Act proposal, in particular. Mr. Speaker, I urge the adoption of the resolution, and I yield back the balance of my time.

Mr. McHENRY. Mr. Speaker, on that I demand the yeas and nays.

Mr. McHENRY

Mr. McHENRY. Mr. Speaker, due to unforeseen circumstances, I was unable to cast my votes for H.R. 6192, H.J. Res. 98, and H.R. 7423. Had I been present, I would have voted YEA on Roll Call No. 182; NAY on Roll Call No. 183; YEA on Roll Call No. 184; YEA on Roll Call No. 185; and YEA on Roll Call No. 186.

Mr. McHENRY

Mr. McHENRY. Mr. Speaker, due to unforeseen circumstances, I was unable to cast my votes for H.R. 7219 and H.R. 7525. Had I been present, I would have voted YEA on Roll Call No. 177, and YEA on Roll Call No. 178.

Mr. McHENRY

Mr. McHENRY. Mr. Speaker, due to unforeseen circumstances, I was unable to cast my votes for H.R. 4866 and H.R. 4755. Had I been present, I would have voted YEA on Roll Call No. 153, and YEA on Roll Call No. 154.

Mr. McHENRY

Mr. McHENRY. Mr. Speaker, pursuant to House Resolution 1149, I call up the bill (H.R. 6323) to modify the availability of certain waiver authorities with respect to sanctions imposed with respect to the financial sector of Iran, and for other purposes, and ask for its immediate consideration in the House.

Mr. McHENRY. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the bill under consideration.

Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, over the weekend, we witnessed Iran's unprecedented attack on our greatest ally and the lone democracy in the Middle East, Israel. Tehran struck our friends in Israel with a swarm of missiles and drone attacks launched from Iranian soil. Thankfully, most of the attack was intercepted by Israeli defense systems with the support from the mighty U.S. military and other partners in the region and across the world. This assault was just the latest sign that the ayatollahs seek to destroy Israel from all sides. In addition to this direct attack, Iran has sought to encircle our Israeli allies through its support of Hamas and Hezbollah. Hamas' terrorist strike last October on innocent Israeli civilians was a wake-up call for many around the world. It underscores the brutality of the Iranian proxies. In response to this aggression, my friend and colleague from California (Mrs. Kim) authored the bill we are considering today, H.R. 6323, the Iran Counterterrorism Act. This legislation will provide Congress a stronger role in any future sanctions relief for Iran. Under current law, the U.S. imposes so-called secondary sanctions against foreign banks that deal with Iran, restricting the ayatollahs' access to hard currency. At the same time, the President enjoys certain waiver authorities that he can invoke for national security purposes. For example, last September, while Hamas was preparing to wage war against Israel, the Biden administration issued a waiver that allowed for $6 billion in Iranian funds to be unfrozen. However, this is not a Democratic or Republican issue we are bringing forward here. Administrations from both parties have used waivers in the past. Additionally, Congress routinely enacts waiver authorities so the executive branch can use discretion in order to convince bad actors to change their behavior. The issue when it comes to Iran is the status quo is simply unsustainable. Congresswoman Kim's bill recognizes this. The regime in Tehran is so hostile, and the threat it poses to Israel and American interests are so high that lawmakers need a greater say when waivers are granted to the ayatollahs' access to the global financial system. This bill before us ensures U.S. sanctions against Iran can only be waived if Iran has ceased support for international terrorism. If the administration cannot certify that Iran is no longer financing terrorism, the bill also provides Congress with a chance to review any national security interest waivers of these sanctions. When H.R. 6323 was passed by the Financial Services Committee, it received bipartisan support because Members are no longer comfortable delegating blanket waiver authorities that benefit Iran. Tehran's continued aggression, from its efforts to destroy Israel, to its pursuit of nuclear weapons, to its export of drone technologies to Russia, demonstrates that our waiver policies need closer scrutiny. Congresswoman Kim's legislation draws on a similar congressional review process already in place for Russian sanctions. This review was established under legislation from 2017 that passed both the House and the Senate with near unanimous support. I am hopeful that our Democratic colleagues will take the threat posed by Iran as seriously as they did Russia when Congress enacted that law. Mr. Speaker, in addition, Mrs. Kim's bill retains the sanctions exemptions we already have in place for humanitarian assistance to ordinary Iranians. Our challenge is with the regime in Iran, not the Iranian people. Her bill focuses on targeting Tehran's ability to finance terrorism, not on punishing innocent Iranian civilians. This bill also is about ensuring that waivers benefiting the Iranian Government receive an appropriate vetting in Congress. After the attacks inflicted on our Israeli allies and friends over the past 7 months, surely, we can all support this commonsense measure. I thank Mrs. Kim for her work on this legislation, and I urge my colleagues to vote in support of this bill. Mr. Speaker, I reserve the balance of my time.

Mr. McHENRY. Mr. Speaker, I yield such time as she may consume to the gentlewoman from California (Mrs. Kim), a member of the Financial Services Committee and the Foreign Affairs Committee.