Bipartisan Memo Challenges SEC's SAB 121: Congress Takes a Stand

Bipartisan Letter from Congress

In a surprising turn of events, several members of Congress have banded together in a memo aimed at key financial authorities. This coalition, led by Chairman Patrick McHenry and Senator Cynthia Lummis, urged the Federal Deposit Insurance Corporation’s chair and the acting comptroller of the currency to clarify the enforceability of the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121). They argue, quite passionately, that this bulletin should be tossed out like an old pizza box—non-enforceable and definitely not catching any legal toppings.

The Crunchy Details of SAB 121

SAB 121 tells financial institutions that they should keep the customers’ crypto assets on their balance sheets, looking all shiny and valuable. This means these banks must maintain capital against these digital assets and treat them differently than traditional assets. Naturally, this has ruffled more than a few feathers in the financial world, with many lawmakers asserting that this could discourage banks from dabbling in the crypto scene.

GAO’s Interesting Finding

What’s more? The Government Accountability Office (GAO) decided to wade into the mix and declared that SAB 121 qualifies as a “rule” under the Congressional Review Act (CRA). This means it’s high time for a real congressional review! It was this finding that got Senator Lummis and her allies riled up and ready to fight back against SEC overreach.

The Lawmakers’ Concerns

In their memo, Congress members raised alarm bells about the implications of enforcing this rule. They’re concerned that it could set a dangerous precedent, allowing regulatory gymnastics that might dodge the Administrative Procedure Act, handing the SEC powers Congress never intended. Even Senator Gillibrand, usually less animated, added her voice to the chorus of displeasure.

The Battle Over Backdoor Regulations

Interestingly, this isn’t the first time SEC Chair Gary Gensler has found himself in hot water. Last year, five senators grilled him about what they labeled “backdoor regulation.” At this point, it’s shaping up to be a lively tug-of-war over who gets to play referee in the crypto regulations game. Flooding the SEC with concerns has become the new pastime for some lawmakers, and it looks like this debate is far from over.