Ahead of a scheduled hearing with the full Securities and Exchange Commission (SEC), Republicans from the House Financial Services and Senate Banking, Housing, and Urban Affairs Committees have called on SEC Chair Gary Gensler to rescind Staff Accounting Bulletin (SAB) 121. The letter was led by Chairman Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY).
Following bipartisan votes in both the House and Senate to overturn SAB 121, Republicans argue that the guidance disrupts custody rules for digital assets, weakens consumer protections, and stifles financial innovation.
In their letter to Chair Gensler, they stated: “Given Congress’ overwhelming bipartisan votes on H.J.Res.109, disapproving the Securities and Exchange Commission (SEC)’s Staff Accounting Bulletin No. 121 (SAB 121), we urge you to rescind the staff guidance.”
The letter criticizes SAB 121 for being issued without consulting prudential regulators. It states: “It would require custodians to recognize a liability and hold a corresponding offset on their balance sheets, measured at the fair value of the customer’s digital assets. This accounting approach...would fail to accurately reflect the underlying legal and economic obligations of the custodian, and place consumers at a greater risk of loss.”
They also highlighted a legal decision by the Government Accountability Office which classified SAB 121 as a rule under the Congressional Review Act. The letter continues: “By issuing this rule under the guise of staff guidance, the SEC evaded the notice and comment rulemaking process required by the Administrative Procedure Act (APA). Rescinding SAB 121 is...well within the SEC’s authority.”
The letter further notes that instead of addressing these issues, "the SEC’s Office of Chief Accountant (OCA) has only caused further confusion," by working with certain institutions confidentially to avoid balance sheet reporting requirements.
The representatives concluded by urging Chair Gensler: “Both the House and Senate vote on H.J. Res. 109 sent a clear message from Congress to the SEC...We urge you to rescind SAB 121 and work with Congress to ensure Americans have access to safe and secure custodial arrangements for digital assets.”