Senator Cynthia Lummis and House Financial Services Committee Chairman Patrick McHenry are calling for the U.S. Securities and Exchange Commission (SEC) to retract Staff Accounting Bulletin 121 (SAB 121). The appeal, outlined in a recent letter to SEC Chair Gary Gensler, asserts that the bulletin’s requirements are detrimental to the cryptocurrency sector and should be rescinded prior to forthcoming oversight hearings.
SAB 121 mandates that cryptocurrency custodians classify customer assets as liabilities on their balance sheets. Lummis, McHenry, and a bipartisan coalition of legislators argue that this rule imposes excessive burdens on custodians, exaggerates their legal responsibilities, and heightens risks for consumers. The letter, endorsed by 13 senators and 29 House representatives, criticizes the SEC for implementing SAB 121 without sufficient consultation or adherence to standard procedures.
Congressman Ritchie Torres has also condemned the SEC’s approach, alleging that SAB 121’s implementation diverges from generally accepted accounting principles (GAAP) and stifles financial innovation. Critics argue that the rule complicates cryptocurrency growth in the U.S. and hampers financial advancements.
The lawmakers have expressed particular concern over the SEC’s selective enforcement of SAB 121. They highlight instances where certain industry participants were reportedly permitted to bypass the disclosure requirements imposed by the rule through undisclosed negotiations.
With SEC Chair Gensler scheduled to testify before Congress soon, it is anticipated that he will face intense scrutiny regarding the SEC’s regulatory stance on cryptocurrencies, including SAB 121 and its broader enforcement strategies.
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