Regulation
US Lawmaker Calls on SEC to Repeal Cryptocurrency Custody Rule Before Senate Vote
US Congressman Wiley Nickel urged the Securities and Exchange Commission (SEC) led by Gary Gensler to repeal Staff Accounting Bulletin 121 (SAB 121) before the upcoming Senate vote.
SAB 121 requires financial institutions that store cryptocurrencies 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 She said would veto any effort to revoke SAB 121. His administration said it “strongly opposes” the change because it would interfere with the SEC’s efforts to protect cryptocurrency investors.
Nonetheless, last week a non-partisan House of Representatives passed the resolution rejecting the controversial regulation.
Withdrawal of BRS 121
On May 15th letter to the SEC Chairman, Nickel advised that withdrawing the directive would be prudent as bipartisan support increases prior to the Senate’s decision. He said:
“The SEC’s mission is to protect investors. However, SAB121 does exactly the opposite, preventing highly regulated American banks from placing digital assets in their custody on a large scale.”
The lawmaker pointed out that the resolution pushed US investors towards offshore custody alternatives and prevented banks from participating in custody services for the recently introduced Bitcoin ETFs. This, he warned, poses a potential concentration risk for the financial system as most issuers rely on a single non-bank entity.
Additionally, Wiley criticized the SEC for bypassing the regulatory process by issuing SAB 121, arguing that the Staff Accounting Bulletin is intended to clarify existing policies, not create new ones.
He added:
“The SEC’s open hostility toward the digital assets industry does not serve President Biden’s interests. The SEC is turning cryptocurrency regulation into a political issue, forcing President Biden to choose sides on an issue that matters to many Americans.”