Representative Patrick McHenry and Senator Cynthia Lummis have joined to issue a statement criticizing a recent action by the Securities and Exchange Commission (SEC).
McHenry is Chair of the House Financial Services Committee. Lummis sits on the Senate Banking Committee.
The statement revolves around the Government Accountability Office’s (GAO) determination that Staff Accounting Bulletin 121 (SAB 121) is a rule for the purposes of the Congressional Review Act. SAB 121 was issued by the SEC on April 11, 2022. The Bulletin sought to clarify the accounting treatment of crypto assets by banks and financial institutions but instead has placed customers more at risk if a bankruptcy should occur and will likely create prohibitive capital costs for institutions that custody crypto assets for consumers, according to the Congresspersons.
The two politicians state that SAB 121 greatly harms consumers and is a “clear overreach of the authority” of the SEC.
McHenry said that many suspected that SAB 121 is subject to Congressional review. He explained that the rule would “impose massive new requirements on financial institutions and other firms to place digital assets on their balance sheets as a liability with a corresponding asset.”
“Ultimately, this would deter institutions and firms from offering custodial services—denying Americans access to safe and secure custody of their assets. SAB 121 was drafted with zero input from prudential regulators and the public, and now Congress must step in to block this harmful rule.”
Lummis added that the Bulletin has massive implications and feedback from impacted parties should have been solicited prior to the rulemaking. She said the Bulleting sets “an incredibly dangerous precedent. I plan to use the Congressional Review Act to block this rule in the coming weeks.”
It was not immediately clear as to the implications of the GAO ruling.
Both McHenry and Lummis are known for their support of innovation in financial services.
The SEC has been criticized by Republicans during the tenure of Chair Gary Gensler for aggressive rulemaking and exceeding its mandated authorities.