House Republicans brace for a confrontation with the SEC over its contentious regulation on digital asset custody, characterizing it as an overextension of the agency's powers. Highlighting this clash, Representative Tom Emmer, a notable figure in the Republican party, blasted SEC Chairman Gary Gensler's leadership during a press meeting on May 7, accusing it of "regulatory double standards, inconsistency, and inefficacy."

At the crux of the disagreement lies Staff Accounting Bulletin 121 (SAB 121), which has sparked controversy for transcending limits and exhibiting bias against the digital asset sector. Rolled out by the SEC more than two years ago as advisory guidance, SAB 121 seeks to govern how banks protect consumer-owned digital assets, with dissenters perceiving it as a move to broaden the SEC's authority while sidestepping input from Congress and the public.

Emmer argued that the regulation not only expands the SEC's jurisdiction beyond its mandate but also trespasses legal boundaries and conflicts with the agency's statutory duty. He contended that SAB 121 amplifies risk concentration within the digital asset realm, undercutting market equity and effectiveness.

Furthermore, the regulation supposedly obstructs American investors from leveraging established banking infrastructure for digital asset custody, potentially exposing them to vulnerabilities should a custodian face bankruptcy. Besides, it allegedly stymies capital creation and global competitiveness by confining US banks while foreign counterparts freely engage in the cryptocurrency markets.

Emmer censured Chairman Gensler for veering off course from the SEC's fundamental objectives through SAB 121, underlining the agency's responsibility to shield investors, nurture capital development, and uphold market credibility. House Republicans aim to push through Congressman Mike Flood's proposal to annul the regulation later this week, urging bipartisan support to endorse a thriving digital asset environment in the United States. Emmer expressed optimism for bipartisan collaboration in their pursuit.