The Chamber of Digital Commerce applauds the bipartisan initiative taken by Senator Cynthia Lummis (R-WY) along with Representatives Mike Flood (R-NE) and Wiley Nickel (D-NC) for their commitment to overturning the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121. SAB 121 has negatively impacted consumers and breached the integrity of the rulemaking process.
Today’s bipartisan resolution represents a decisive action to ensure the SEC operates within its designated rulemaking authority. By failing to issue SAB 121 in adherence with the rulemaking process, the SEC bypassed established procedures, compromising the integrity of the regulatory framework, and violating principles of transparent and inclusive governance.
Moreover, SAB 121’s implementation imposed stringent restrictions on banks and other trusted custodians’ ability to manage digital assets. This not only heightened the risks of consumers delving into digital asset investments, but also increased their financial burdens, making it more challenging for them to safely engage with digital assets.
As we celebrate this milestone, let us also prepare for the road ahead. We will continue to engage with our allies in Congress, the industry, and the broader community to ensure that this resolution passes and SAB 121 is nullified as we pave the way for the responsible, innovative growth of the digital asset sector.
- The SEC issued SAB 121 in March 2022. It presented an unworkable regulatory environment for digital asset custodians by mandating an equivalent liability on the balance sheet for each held digital asset. This requirement, both unprecedented and financially unfeasible, threatened the operational viability of digital asset custodians.
- In response, the Chamber of Digital Commerce’s Token Alliance established our SAB 121 workstream, driving advocacy efforts to rescind the unworkable rule. The workstream has submitted eight letters to Congress concerning digital asset custody matters, engaged with the SEC’s Office of the Chief Accountant, and urged the Government Accountability Office (GAO) to review the rule in a collaborative effort with Senator Lummis and Representative McHenry.
- In October 2023, the GAO conducted a comprehensive review and concluded that SAB 121 qualifies as a rule under the Congressional Review Act (CRA). This classification was due to its nature as an agency statement of general applicability and future effect, aimed at interpreting and prescribing policy.
- CRA allows Congress to review and approve/disapprove rules issued by federal agencies for a period of 60 days (if rule not submitted, its 60 days from GAO opinion). If Congress does not agree with the rule, each chamber may pass a resolution of disapproval that must be signed by the President. If a rule is nullified by a resolution of disapproval, the rule is void and the SEC is prohibited from reissuing a similar regulation without congressional authorization.
- Resolutions of disapproval need to be passed by both Houses of Congress by a simple majority vote – so Senate only needs 51 votes not 60.
- This resolution must also be signed by the President. Successfully passing this resolution not only stops the rule from being implemented or remaining in effect but also prevents the agency from reintroducing a similar rule unless new legislation permits it.