Senator Cynthia Lummis and House Financial Services Committee Chairman Patrick McHenry have urged the U.S. Securities and Exchange Commission (SEC) to revoke Staff Accounting Bulletin 121 (SAB 121).
In a letter to SEC Chair Gary Gensler, they highlighted the rule’s negative impact on the cryptocurrency industry and demanded its withdrawal ahead of upcoming oversight hearings.
SAB 121 requires crypto custodians to list customer assets as liabilities on their balance sheets, which Lummis, McHenry, and a bipartisan group of lawmakers argue creates unnecessary burdens.
They claim the rule overstates custodians’ legal obligations and increases risk for consumers. The letter, signed by 13 senators and 29 House representatives, points out that SAB 121 was implemented without adequate consultation or following required procedures.
Congressman Ritchie Torres also criticized the SEC, accusing it of misusing SAB 121 and implementing it against generally accepted accounting principles (GAAP). Critics argue that this rule stifles financial innovation and complicates the growth of cryptocurrencies in the U.S.
The lawmakers expressed concern about the SEC’s selective enforcement of the rule, citing closed-door meetings with certain industry players who were allowed to bypass the disclosure requirements of SAB 121.
With SEC Chair Gensler set to testify before Congress soon, lawmakers are expected to question him about the SEC’s regulatory approach to cryptocurrencies, including SAB 121 and its broader enforcement actions.
