SEC rolls back banks crypto accounting rule; Fed keeps rates steady

The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital.

At federal regulators

The US SEC rescinded an accounting regulation — Staff Accounting Bulletin 121 (SAB 121) — that required banks to classify bitcoin and other cryptocurrencies as liabilities on their balance sheets.

Issued in 2022, SAB 121 provided "interpretive guidance" on the accounting treatment and disclosure of cryptocurrency assets held by financial institutions and banks on behalf of consumers.

In October 2023, the Government Accountability Office determined that the SEC's SAB 121 is subject to Congressional review. The US House of Representatives passed a bipartisan bill to overturn the rule in 2024, which was vetoed by then-President Joe Biden.

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The US Federal Reserve maintained the target range for the federal funds rate at 4.25% to 4.5%, citing an uncertain economic outlook.

The Fed has lowered interest rates by 100 basis points since September 2024, when rates were at their highest point in decades.

"With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance," Fed Chair Jerome Powell told reporters.

"Policy is meaningfully less restrictive than it was before we began to cut — it's 100 basis points less restrictive," Powell said. "For that reason, we're going to be focusing on seeing real progress on inflation or alternatively some weakness in the labor market before we consider making adjustments."

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Key Square Capital Management LLC CEO and Chief Investment Officer Scott Bessent was sworn in as the US Treasury secretary.

The Senate confirmed Bessent 68-29 on Jan. 28, The Wall Street Journal reported.

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A governmentwide hiring freeze forced the Federal Deposit Insurance Corp. to rescind job offers to more than 200 new examiners, The Washington Post reported. The cuts primarily affect entry-level examiner positions, and the agency is contemplating requests for exemptions from the freeze.

Sen. Elizabeth Warren (D-Mass.) criticized the decision, urging the FDIC to clarify why it is reducing its examiner workforce, which is vital for preventing large banks from jeopardizing the economy, the report said.

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A group of lawyers called on US regulators to simplify the process for establishing new banks, Reuters reported, citing a letter by the group seen by the news outlet.

In the letter, addressed to the new leadership of banking agencies, the lawyers criticized the existing "bureaucratic inefficiencies" that create significant barriers to entry for new banks and urged regulators to foster competition by facilitating the formation of these institutions, according to the report.

To encourage innovation, the lawyers urged regulators to set realistic expectations for new bank applications and to acknowledge that failure is a natural part of the process. They also reportedly called for improved transparency in the application process and a commitment to a 120-day review period.

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The National Treasury Employees Union and the chief of staff at the Consumers Financial Protection Bureau are advising employees to ignore a mass email from the Trump administration that offers federal workers the opportunity to resign, American Banker reported.

Jan Singelmann, the CFPB's chief of staff, acknowledged the email and said the agency is assessing its implications for employees, promising further communication soon, according to the report. Meanwhile, CFPB Director Rohit Chopra remains in his position despite speculation about his potential dismissal.

On Jan. 28, Sen. Tim Scott (R-SC), chairman of the Senate Banking Committee, indicated that the Trump administration will soon provide clarity regarding Chopra's future, according to a separate report by American Banker. Scott expressed optimism about a forthcoming "blockbuster announcement" concerning leadership at the CFPB.

Rep. Andy Barr (R-Ky.) reintroduced the Taking Account of Bureaucrats' Spending Act, which would subject the CFPB to the traditional congressional appropriations process.

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The Securities Industry and Financial Markets Association and other trade groups urged the SEC to grant an additional year for implementing new centralized clearing rules for the US Treasury market, citing concerns about potential disruptions during the transition, Reuters reported.

In December 2023, the SEC introduced rules designed to mitigate systemic risks in the $28 trillion Treasury market by requiring that more trades go through clearinghouses, with phased implementation scheduled to conclude by June 2026.

While the Clearing Rule is expected to enhance market stability, the significance of the Treasury market necessitates a smoother transition to avoid disruptions, the groups argued.

On Capitol Hill

Scott said the Senate Banking Committee would hold a hearing focused on debanking on Feb. 5. Witnesses will be announced at a later date, according to a Jan. 24 release.

At the CFPB

The CFPB terminated its 2022 consent order related to automobile lending, consumer deposit accounts and mortgage lending against Wells Fargo & Co.

It is Wells Fargo's seventh consent order that regulators closed since 2019, according to a Jan. 28 release.

In 2022, the CFPB identified violations in Wells Fargo's consumer product lines that resulted in financial harm, including improper denial of mortgage loan modifications, miscalculated fees, unjust account freezes and excessive overdraft charges.

The 2022 order required Wells Fargo to pay $2 billion in redress to consumers and pay a $1.7 billion civil penalty, among other enforcement actions.

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The CFPB ordered UK-based remittance company Wise PLC to pay nearly $2.5 million for alleged illegal practices, including misleading customers about fees and failing to disclose exchange rates and other costs.

The CFPB found that Wise misrepresented ATM fees to US customers and did not refund remittance fees in a timely manner when transactions were delayed, according to a Jan. 30 CFPB release.

The order requires Wise to provide roughly $450,000 in compensation to affected customers and pay a civil penalty of $2.025 million.