US Lawmakers Push Back on SEC's Crypto Asset Regulation with Proposed Repeal of SAB 121

According to Cointelegraph: US Representatives Mike Flood and Wiley Nickel, alongside Senator Cynthia Lummis, have proposed resolutions to nullify the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin 121 (SAB 121). This move by US lawmakers comes in response to the bulletin's restrictions placed on banks wishing to hold their client’s cryptocurrency assets on the balance sheet. Introduced under the Congressional Review Act, the resolution dated February 1, 2023, would formally challenge the accounting rule and decree that it holds no legal leverage. SAB 121 has faced criticism for its stance that banks must endure the capital-laden requirement of holding their client’s crypto assets on their balance sheet. Lawmakers argue this stipulation discourages regulated banks from acting as crypto custodians and creates an unfair bifurcation, treating crypto assets differently from other holdings. The resistance towards SAB 121 continued in November 2023, when numerous Congress members submitted a memo to key financial entities, including the Chair of the Board of the Federal Deposit Insurance Commission. The memo sought clarification and challenged enforceability following the Government Accountability Office’s (GAO) findings. The GAO corroborated that a congressional review of the SAB 121 is warranted. This follows Senator Lummis's letter to the US Comptroller General in August 2022, questioning whether the bulletin qualifies as a rule under the Congressional Review Act. Lummis highlighted concerns surrounding the potential limitations the SAB 121 directive could place on consumer protection and the ability of financial institutions to safely protect American's financial assets. In a unified sentiment, Representative Mike Flood criticized the SEC's unilateral roll-out of SAB 121, asserting that Congress should act as a guard against overstepping regulatory agencies.