Bipartisan Effort to Repeal SEC Crypto Custody Rule Gains Momentum

Lawmakers argue the rule undermines consumer protection and stifles banking services for digital assets.

A bipartisan group of U.S. lawmakers, led by Sen. Cynthia Lummis, R-Wyo., and Reps. Mike Flood, R-Neb., and Wiley Nickel, D-N.C., has introduced a joint resolution to repeal the SEC's Staff Accounting Bill (SAB) 121, which mandates crypto custodians to report customer crypto holdings as liabilities on their balance sheets.
The move comes after the Government Accountability Office found that the SEC failed to follow the Congressional Review Act when issuing SAB 121, making it potentially unenforceable.
SEC Chair Gary Gensler defended SAB 121, stating it aligns with U.S. bankruptcy court precedents that crypto assets are not bankruptcy remote.
Critics argue that SAB 121 undermines consumer protection, disincentivizes banks from providing custodial services for digital assets, and represents overreach by the SEC.
The resolution must pass both chambers of Congress to become law, marking a significant bipartisan effort to regulate the SEC's approach to crypto custody.