A bipartisan group of lawmakers has urged the Biden Administration to reconsider its intention to veto Congress's proposal aimed at repealing SEC's Staff Accounting Bulletin No. 121 (SAB 121).

In a letter dated May 30, the coalition called on the administration to encourage the SEC to either rescind the standard or support the Congressional resolution to repeal it.

The letter underscored concerns about the current accounting treatment mandated for digital assets under SAB 121, issued on March 31, 2022. This standard requires entities that hold digital assets for customers to consolidate these assets on their balance sheets and provide specific disclosures. Lawmakers argued that this approach diverges from how other asset classes are treated and could expose consumers to increased risks by discouraging regulated financial institutions from managing digital assets.

Highlighting that the Government Accountability Office (GAO) classifies SAB 121 as a rule under the Administrative Procedure Act (APA) and Congressional Review Act (CRA), the letter criticized the SEC for bypassing the traditional notice and comment rulemaking process. This allowed the SEC to avoid a full commission vote and restricted stakeholder input.

The lawmakers emphasized that the SEC has the authority to revisit and rescind staff accounting bulletins, noting that most revisions or rescissions over the past three decades have been routine. Despite this, SEC Chair Gary Gensler has maintained support for SAB 121, which the lawmakers believe harms the industry.

Signatories of 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 to bipartisan support for H.J.Res.109, expressing congressional disapproval of SAB 121. They urged President Biden to sign the resolution into law or work with the SEC to revoke the guidance.

The lawmakers warned that if Chair Gensler persists in upholding SAB 121, Congress should enact the resolution disapproving the rule or allow it to take effect.

The ongoing debate over SAB 121 reflects broader tensions concerning the regulatory treatment of digital assets and the role of financial institutions in managing these emerging financial instruments.