Congressman Wiley Nickel, a Democratic representative from California, recently criticized SEC Chair Gary Gensler over the agency’s approach to crypto regulation, particularly regarding Staff Accounting Bulletin 121 (SAB121). Nickel sent a letter to Gensler urging him to withdraw the controversial bulletin, citing concerns about investor protection, American competitiveness, and the need to respect Congress’s role in the regulatory process. The withdrawal of SAB121, according to Nickel, would help balance crypto regulation and facilitate digital asset custodial banking. The SEC’s guidance on digital asset accounting has faced criticism for imposing strict capital requirements on banks interested in entering the crypto space, requiring them to list clients’ liabilities alongside custodied digital assets on their balance sheets.
In addition to concerns about the regulatory stance of SAB121, U.S. lawmakers have questioned the approval process of the bulletin. The Government Accountability Office (GAO) found that the SEC failed to report the rule change under the Congressional Review Act (CRA), further adding to the controversy. Last week, the House passed H.J. Res 109, a bill introduced by Congressman Nickel and Representative Mike Flood (R-NE) aimed at invalidating SAB121. Following the House vote, Senator Cynthia Lummis (R-WY) has led the Senate’s efforts to nullify the accounting bulletin, asserting that SAB121 restricts well-regulated banks from securing digital assets and poses risks to consumers. Nickel accused Gensler and the SEC of bypassing the standard regulatory process, suggesting an abuse of the agency’s authority.
Despite the House’s passage of Nickel and Flood’s bill, President Joe Biden has expressed his intention to veto any attempts to invalidate SAB121. The White House issued a statement citing the need for regulatory measures to address technological, legal, and regulatory risks that have harmed consumers, emphasizing the importance of the SEC in maintaining a comprehensive and effective regulatory framework for crypto-assets. Should the Senate approve Lummis’ companion legislation to nullify SAB121, Nickel’s letter to Gensler may be a final attempt to persuade the SEC Chair to withdraw the controversial bulletin before it reaches Biden’s desk. The ongoing debate reflects the complexities of regulating the rapidly evolving crypto industry and the challenges of striking a balance between innovation and investor protection.
