More than 40 Republican Party senators and representatives in the United States have urged the SEC to rescind its “disastrous” Staff Accounting Bulletin No. 121 (SAB 121) rule, following bipartisan support for a repeal bill that was vetoed.
In a letter dated Sept. 23 to SEC Chair Gary Gensler, House Financial Services Committee Chair Patrick McHenry and Senator Cynthia Lummis, along with 40 other politicians, claimed that SAB 121 disrupts custody rules for cryptocurrencies, weakens consumer protections, and stifles financial innovation.
The 42 politicians further stated that SAB 121— a proposed rule requiring SEC-reporting entities that hold cryptocurrencies to list those holdings as liabilities—was issued without consultation with “prudent regulators” and deviates from established accounting standards.
“It would fail to reflect the legal and economic obligations of the custodian and put consumers at risk of loss,” the letter asserted.
“By issuing this rule under the guise of staff guidance, the SEC evaded the notice and comment rulemaking process required by the Administrative Procedure Act,” the politicians added.
“Rescinding SAB 121 is the only appropriate action and well within the SEC’s authority.”
Democratic Representative Wiley Nickel has claimed that SAB 121 would hinder U.S. banks from custodying cryptocurrency exchange-traded products at scale, creating a “concentration risk” by giving non-bank entities more control.
The letter was sent ahead of a House Financial Services Committee hearing with the SEC on Sept. 24.
The politicians also criticized the SEC’s Office of the Chief Accountant for allegedly collaborating with certain institutions to circumvent the balance sheet reporting requirements, potentially leading to inconsistencies.
According to a Sept. 17 hearing in Wyoming, the Bank of New York Mellon, the largest custodian bank in the U.S., reportedly received an exemption from SAB 121.
The letter’s supporters mainly consisted of Republican members from the House Financial Services and Senate Committee on Banking, Housing, and Urban Affairs.
President Joe Biden vetoed the SAB 121 repeal bill in June after it received bipartisan support, and the House later failed to overturn that veto on July 10, falling 60 votes short of the necessary two-thirds majority.