A bipartisan coalition of lawmakers has called on the Biden Administration to abandon its plan to veto Congress's proposal to repeal the SEC's controversial Staff Accounting Bulletin No. 121 (SAB 121).

In a letter dated May 30, the lawmakers urged the administration to press the SEC to either rescind the standard or support Congress's effort to enact legislation repealing the accounting standards.

The letter underscored concerns about the risks posed to consumers and the financial sector by the current accounting treatment mandated for digital assets. SAB 121, issued on March 31, 2022, requires entities holding digital assets for customers to consolidate these assets onto their balance sheets and disclose specific details.

According to the lawmakers, this requirement diverges from the accounting treatment applied to other asset classes and could heighten risks for consumers by discouraging regulated financial institutions from managing digital assets.

They noted that the Government Accountability Office (GAO) has classified SAB 121 as a rule under the Administrative Procedure Act (APA) and the Congressional Review Act (CRA). The letter criticized the SEC for circumventing the traditional notice and comment rulemaking process, which allowed it to avoid a full commission vote and excluded stakeholder input.

The lawmakers highlighted that revisiting and rescinding staff accounting bulletins falls within the SEC's authority, noting that most such actions over the past three decades have involved revisions or rescissions. Despite this precedent, SEC Chair Gary Gensler has maintained support for SAB 121, which the lawmakers argued is detrimental to the industry.

Signatories to the letter, including Senators Cynthia Lummis and Representatives Patrick McHenry, Andy Barr, Tom Emmer, Mike Flood, French Hill, Dan Meuser, Wiley Nickel, and Ritchie Torres, pointed out the bipartisan support for H.J.Res.109. This resolution expresses congressional disapproval of SAB 121 and demonstrates widespread opposition to the rule.

The lawmakers urged President Biden to either sign the resolution into law or collaborate with the SEC to revoke the guidance. They emphasized:

"Congress has spoken: the SAB 121 CRA vote sent a clear, bipartisan message to the SEC that this misguided policy is harmful to consumers. Staff guidance was not appropriate to impose policy changes and must be overturned."

They warned that if Chair Gensler persists in upholding SAB 121, the resolution disapproving the rule should be enacted into law or allowed to take effect. This ongoing debate underscores broader tensions over the regulatory treatment of digital assets and the role of financial institutions in managing these emerging financial instruments.