Republicans in the House of Representatives are gearing up to challenge the SEC’s controversial rule on digital asset custody, labeling it as an overreach of the agency’s authority.
During a press conference on May 7, Representative Tom Emmer, a leading Republican lawmaker, criticized the tenure of SEC Chairman Gary Gensler, calling it marked by “hypocrisy, inconsistency and regulatory incompetence.”
The issue at hand, known as Staff Accounting Bulletin 121 (SAB 121), has been criticized for crossing boundaries and showing bias against the digital asset ecosystem.
The SEC introduced SAB 121 more than two years ago and designated it as guidance. The rule, which aims to regulate how banks protect digital assets owned by consumers, was described as an attempt to expand the SEC’s authority while bypassing input from Congress and the public.
Emmer argued that the rule not only goes too far, but is also illegal and contrary to the SEC’s statutory mission. According to him, SAB 121 increases concentration risk in the digital asset ecosystem, making markets less fair and efficient.
The rule also restricts U.S. investors from using established banking infrastructure for digital asset custody, increasing vulnerability if a custodian becomes insolvent. Furthermore, the rule would hinder capital formation and global competitiveness by allowing foreign banks to compete in crypto markets while restricting US banks.
Emmer argued that Chairman Gensler violates all three objectives with SAB 121. He added:
“The SEC’s statutory mission is to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets.”
Later this week, Republicans in the House of Representatives plan to adopt Congressman Mike Flood’s resolution to repeal the rule. They urged bipartisan support and emphasized the importance of a thriving digital asset ecosystem in the United States.
Bucket said:
“We hope our colleagues across the aisle will join us in this effort.”