House Republicans are preparing to contest the SEC's contentious rule on digital asset custody, branding it as an overreach of the agency's powers. Representative Tom Emmer, a notable Republican figure, criticized SEC Chairman Gary Gensler's leadership during a press briefing on May 7, accusing it of "regulatory hypocrisy, inconsistency, and incompetence."

The focal point of the dispute, dubbed Staff Accounting Bulletin 121 (SAB 121), has faced backlash for exceeding boundaries and displaying bias against the digital asset sector. Introduced by the SEC over two years ago as guidance, SAB 121 aims to regulate how banks secure consumer-owned digital assets, with critics viewing it as an attempt to expand the SEC's jurisdiction while bypassing congressional and public input.

Emmer contended that the rule not only stretches the SEC's authority but also breaches legal boundaries and contradicts the agency's statutory mandate. He argued that SAB 121 heightens concentration risk within the digital asset ecosystem, undermining market fairness and efficiency.

Moreover, the rule allegedly impedes American investors from utilizing established banking infrastructure for digital asset custody, potentially exposing them to risk if a custodian faces insolvency. Additionally, it purportedly hinders capital formation and global competitiveness by restricting US banks while foreign counterparts can operate in crypto markets.

Emmer criticized Chairman Gensler for deviating from the SEC's core objectives with SAB 121, stressing the agency's duty to safeguard investors, foster capital formation, and ensure market integrity. House Republicans plan to pass Congressman Mike Flood's resolution to revoke the rule later this week, urging bipartisan backing to support a flourishing digital asset landscape in the US. Emmer expressed hope for bipartisan cooperation in their endeavor.