Patrick McHenryChairman

Washington, September 23, 2024 -

Ahead of tomorrow’s hearing with the full Securities and Exchange Commission (SEC), Republicans on the House Financial Services and Senate Banking, Housing, and Urban Affairs Committees—led by Chairman Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY)—sent a letter to SEC Chair Gary Gensler demanding the agency rescind its disastrous Staff Accounting Bulletin (SAB) 121.

Following bipartisan votes to overturn SAB 121 in both the House and Senate, Republicans are calling on Chair Gensler to rescind the agency guidance which upends custody rules for digital assets, weakens consumer protections, and stifles financial innovation.

Read the full letter here or below:

“Dear Chair Gensler: 

“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. 

“SAB 121 was issued without consulting any of the prudential regulators. 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, which deviates from established accounting standards, would fail to accurately reflect the underlying legal and economic obligations of the custodian, and place consumers at a greater risk of loss. 

“The Government Accountability Office issued a legal decision that SAB 121 is a rule for purposes of the Congressional Review Act. 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 the only appropriate action and well within the SEC’s authority. There is ample precedent for revisiting a staff accounting bulletin. 

“Instead of recognizing this failure and rescinding the guidance, the SEC’s Office of Chief Accountant (OCA) has only caused further confusion, working with certain institutions to avoid the balance sheet reporting requirements. These consultations, completed on a case-by-case and confidential basis, do not provide the transparency or certainty needed to ensure SAB 121’s requirements are consistently applied across different institutions. Further, this approach defeats the SEC’s own – albeit flawed – argument because it fails to ensure enhanced disclosures are provided to investors.

“Both the House and Senate vote on H.J. Res. 109 sent a clear message from Congress to the SEC. Issuing staff guidance to impose policy changes is not appropriate and violates both the spirit and the letter of the Administrative Procedure Act. 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.”

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