Over 40 Republican lawmakers have once again called on the US Securities and Exchange Commission (SEC) to scrap a rule affecting the cryptocurrency industry.
On September 23, Senator Cynthia Lummis and House Financial Services Chair Patrick McHenry led the group in sending a letter to SEC Chair Gary Gensler, urging him to reverse the decision regarding Staff Accounting Bulletin No. 121 (SAB 121).
SAB 121, introduced in March 2022, requires crypto custodians to record digital assets as liabilities on their balance sheets. Lawmakers opposing the rule claim it discourages banks from handling crypto, pushing the responsibility onto less regulated entities. They believe this could put the entire industry and its consumers at greater risk.
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In their letter, the lawmakers also took issue with how the rule was implemented. They claim that the SEC bypassed a formal process that allows the public to provide input on new regulations.
Moreover, they allege the SEC worked privately with select institutions to help them avoid complying with the rule, adding:
These consultations, completed on a case-by-case and confidential basis, do not provide the transparency or certainty needed to ensure SAB 121's requirements are consistently applied across different institutions, raising concerns over transparency.
This new push follows an earlier attempt by Congress to repeal SAB 121. While that attempt passed through Congress with bipartisan support, President Joe Biden vetoed it, citing concerns about investor protection. An effort to override the veto in July fell short, with 207 Republicans and 21 Democrats voting for the repeal, but not enough to reach the required two-thirds majority.
The SEC has long been criticized for its heavy-handed approach to regulating crypto through enforcement actions rather than setting clear guidelines. One example was the case of FlyFish Club, which settled with the SEC for $750,000 after being accused of selling unregistered crypto securities through non-fungible tokens (NFTs).
With lawmakers continuing to pressure the SEC, the fight over SAB 121 is far from over, leaving the future of crypto regulation in the US uncertain.
