Congressman Wiley Nickel has strongly criticized the Securities and Exchange Commission (SEC) and its Chair Gary Gensler for their negative approach towards digital assets and the controversial staff accounting bulletin, SAB121. Nickel sent a letter to Gensler, urging him to withdraw SAB121 and highlighting the importance of protecting investors, promoting American competitiveness, and respecting Congress’s role in the rulemaking process.
Nickel emphasized the need to withdraw SAB121 as a way to strike a balance in regulating cryptocurrencies and enabling digital asset custodial banking. The SEC’s guidance on digital asset accounting has faced criticism for its strict capital requirements for banks entering the crypto space. Financial institutions participating in the industry are required to disclose clients’ liabilities along with custodied digital assets on their balance sheets.
Apart from concerns about the regulatory stance of the bulletin, US lawmakers have raised doubts about the approval process of SAB121. The Government Accountability Office (GAO) found that the SEC failed to report the rule change under the Congressional Review Act (CRA).
In response to these criticisms, the House passed H.J. Res 109, a bill introduced by Nickel and Representative Mike Flood, to invalidate SAB121. Following this, Senator Cynthia Lummis has led the Senate’s efforts to nullify the controversial accounting bulletin.
Nickel stated that SAB121 restricts well-regulated banks from safely storing digital assets, making the industry less secure for consumers. He accused Gensler and the SEC of bypassing the usual regulatory process, asserting that it was an overreach of their authority.
However, President Joe Biden expressed his intention to veto any attempts to turn the bill into law. Biden argued that the bill was a response to demonstrated risks in the technological, legal, and regulatory aspects of the crypto industry, which have caused significant consumer losses. The White House emphasized the importance of maintaining a comprehensive and effective regulatory framework for crypto-assets to ensure financial stability and market certainty.
If the Senate passes Lummis’ companion legislation, Nickel’s letter to Gensler could be a last-minute effort to convince him to rescind SAB121 before it reaches Biden’s desk.