Tom Emmer Slams SEC’s Gary Gensler For Illegal Rulemaking Amid SAB 121 Controversy

House Majority Tom Emmer gravely slammed the SEC Chair Gary Gensler for “illegal rulemaking” with respect to the Staff Accounting Bulletin (SAB) 121. Emmer did not mince his words while pinpointing Gensler’s wrongdoings as he advocated the resolution for revoking SAB 121.

Tom Emmer Bashes Gary Gensler

During Thursday’s House Committee meeting, Tom Emmer spotlighted that Gary Gensler overstepped the SEC’s authority due to his “unrelenting prejudice” toward digital assets. In addition, he underscored that the SEC disguised this “overreaching” rule as a guidance to the Congress and public by barring banks to exhibit custody over crypto assets.

Thereafter, he highlighted the impact of SEC Chair Gary Gensler’s “illegal rulemaking,” which has been in place for two years. Emmer noted that the SAB 121 rule introduces unnecessary and avoidable concentration risk into the crypto ecosystem. Moreover, he declared that Gary Gensler and the SEC’s rulemaking led to an unfair, disorderly, and inefficient crypto market.

Furthermore, he addressed concerns around the recently launched Spot Bitcoin ETFs. Emmer noted that the Spot Bitcoin ETFs serve as a great example for the dire implications of SAB 121. He underscored that none of the banks serve as custodians for any of the 11 Spot Bitcoin ETFs approved in January, which is “risky.” Additionally, he said that SAB 121 leads to weakened investor protection as they rely on less regulated institutions for custodian services.

Also Read: House Republican’s Pro-Crypto Bill Gets Major Push, Institutional Adoption To Soar?

House Committee Approves Resolution To Revoke SAB 121

The House Financial Services Committee convened on Thursday to vote on advancing a resolution aimed at appealing the SEC’s SAB 121. Introduced in March 2022 and enacted the following month, SAB 121 mandates that digital asset custodians report a liability and “corresponding assets” on their balance sheets for all custodied cryptocurrencies.

The SEC Chair Gary Gensler and staff asserted this practice is essential to mitigate the “significant risks and uncertainties associated with safeguarding crypto assets.” Committee members Mike Flood, R-Neb., and Wiley Nickel, D-N.C., put forth the resolution earlier this month, echoing a similar effort in the Senate led by Cynthia Lummis, R-Wyom.

Their initiative stemmed from a report by the Government Accountability Office in October 2023, which argued that SAB 121 should have undergone the official rulemaking process. “Unfortunately, there were some serious problems with the process around SAB 121 and how it was issued,” stated Rep. Flood during Thursday’s markup hearing.

He added, “The SEC issued SAB 121 without conferring with the prudential regulators who are the experts on regulating bank custody. That’s a pretty significant oversight.” Although SABs lack enforceability under securities law, the SEC utilizes them for interpretations and practices. Unlike traditional agency rules, SABs bypass public notice or comment periods and do not require the official approval of Commissioners.

Opponents of the resolution contend that SAB 121 provides a crucial layer of consumer protection. Rep. Maxine Waters, D-Cali., a vocal critic of crypto-friendly efforts, emphasized the necessity of measures like SAB 121 in preventing fraud.

“This guidance was offered to protect investors against the mishandling of customer crypto assets by custodians, a practice that was at the core of FTX’s spectacular collapse when billions of crypto assets went missing,” asserted Rep. Waters during Thursday’s session.

Also Read: House Committee Moves to Overturn SEC Crypto Custody Rule