US MP Wiley Nickel has urged the Gary Gensler-led Securities and Exchange Commission (SEC) to withdraw Staff Accounting Bulletin 121 (SAB 121) before the upcoming Senate vote.
SAB 121 requires financial institutions that hold crypto to keep these assets on their balance sheets. Several stakeholders have spoken out against the regulation, arguing that it hinders the growth of the sector.
However, President Joe Biden said he would veto any attempt to overturn SAB 121. His administration said it “strongly opposes” the change because it would hinder the SEC’s efforts to protect crypto investors.
Nevertheless, a nonpartisan House of Representatives last week passed the resolution rejecting the controversial scheme.
Repeal SAB 121
On May 15 letter Nickel told the SEC chairman that rescinding the directive would be prudent as bipartisan support increases ahead of the Senate decision. He said:
“The SEC’s mission is to protect investors. However, SAB121 does the exact opposite by preventing highly regulated U.S. banks from taking digital assets into custody on a large scale.”
The lawmaker pointed out that the resolution had pushed US investors toward offshore custody alternatives and prevented banks from participating in custodial services for newly launched Bitcoin ETFs. He warned that this poses a potential concentration risk to the financial system as most issuers rely on a single non-bank entity.
In addition, Wiley criticized the SEC for circumventing the rulemaking process in issuing SAB 121, claiming that the Staff Accounting Bulletin is intended to clarify existing policies and not create new policies.
He added:
“The SEC’s open hostility toward the digital asset industry does not serve President Biden’s best interests. The SEC is turning cryptocurrency regulation into a political football and forcing President Biden to take sides on an issue important to many Americans.”