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Congressman Wiley Nickel Slams SEC’s “Open Hostility” Towards Digital Assets, Urges Gensler To Rescind SAB121

Julia Smith
Last updated: | 1 min read
A depiction of D.C. overlaid with cryptocurrencies symbolizing Wiley Nickel's criticism of the SEC's SAB121 in a letter to the federal agency's chair Gary Gensler.
Congressman Wiley Nickel criticizes SEC's approach to crypto regulation, calling for the withdrawal of SAB121.

Congressman Wiley Nickel (D-CA) has criticized SEC Chair Gary Gensler over the agency’s “open hostility” towards crypto and SAB121. Nickel sent a letter to Gensler on Wednesday urging him to rescind the controversial staff accounting bulletin amidst the Senate vote to nullify it.

SEC, SAB121 Face Criticism From Rep. Wiley Nickel

Nickel wrote, “I strongly encourage you to withdraw SAB121 to protect investors, bolster American competitiveness, and respect Congress’s role in the administrative rulemaking process.”

He emphasized that withdrawing SAB121 before the Senate vote would be a positive step towards balancing crypto regulation and allowing for digital asset custodial banking.

The SEC’s guidance on digital asset accounting has long been criticized for its stringent capital requirements on banks looking to enter crypto. Participating financial institutions are required to list clients’ liabilities alongside custodied digital assets on their balance sheets.

In addition to scrutiny regarding the bulletin’s regulatory stance, U.S. lawmakers have cast doubt over SAB121’s approval process. The Government Accountability Office (GAO) found that the SEC failed to report the rule change under the Congressional Review Act (CRA).

Gary Gensler Under Fire From U.S. Lawmakers As SAB121 Senate Vote Looms

Last week, the House passed H.J. Res 109, a bill Nickel and Representative Mike Flood (R-NE) introduced to invalidate SAB121. Following the House vote, Senator Cynthia Lummis (R-WY) has led the Senate push to invalidate the controversial accounting bulletin.

“SAB 121 hinders well-regulated banks from safeguarding digital assets, making the industry less safe for consumers,” Nickel said in a statement last week. “Gary Gensler and the SEC deliberately sidestepped the customary regulatory process, amounting to an obvious overreach of the agency’s authority.”

However, shortly after the House passed Flood and Nickel’s bill, President Joe Biden said he would veto attempts to make the bill a law because it was “issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers.”

“Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty,” a May 8 letter from the White House states.

Should the Senate pass Lummis’ companion legislation, Nickel’s letter to Gensler may be a last-minute push to get Gensler to rescind SAB121 before it would reach Biden’s desk.