More than 40 United States Republicans have called on the US securities regulator to rescind its “disastrous” Staff Accounting Bulletin No. 121 rule after a repeal bill received bipartisan support before being vetoed.

SAB 121 upends custody rules for cryptocurrencies, weakens consumer protections, and stifles financial innovation, House Financial Services Committee Chair Patrick McHenry, Senator Cynthia Lummis and 40 other politicians claimed in a Sept. 23 letter to the Gary Gensler-led Securities and Exchange Commission.

The 42 politicians further claimed that SAB 121 — a proposed rule mandating that SEC-reporting entities custodying cryptocurrencies must record those holdings as liabilities on their balance sheets — was issued without consulting any “prudent regulators” and that the accounting approach “deviates from established accounting standards.”

House Republicans urge SEC to rescind ‘disastrous’ SAB 121 image 0

Source: United States House of Financial Services Committee

It would fail to reflect the legal and economic obligations of the custodian and put consumers at risk of loss, they claimed.

“By issuing this rule under the guise of staff guidance, the SEC evaded the notice and comment rulemaking process required by the Administrative Procedure Act,” the politicians added.

“Rescinding SAB 121 is the only appropriate action and well within the SEC’s authority.”

Democrat House Rep Wiley Nickel previously claimed SAB 121 would prevent US banks from custodying cryptocurrency exchange-traded products at scale, consequently creating a “concentration risk” by handing more control over to non-bank entities.

The letter comes ahead of the House of Financial Services Committee’s hearing with the SEC on Sept. 24.

The politicians also slammed the SEC’s Office of Chief Accountant for supposedly working with certain institutions to avoid the balance sheet reporting requirements — setting up the possibility for inconsistency across the board.

Bank of New York, the largest custodian bank in the US, reportedly received an exemption from SAB 121, according to a Sept. 17 hearing in the Wyoming legislature.

Related: SEC ‘dug in’ on bank crypto custody rule as agency’s stance ‘unchanged’

Those in support of the letter largely comprised Republican members from the House of Financial Services and Senate Committee on Banking, Housing and Urban Affairs.

House Reps French Hill, Tom Emmer, and Senators Bill Hagerty and Tim Scott were among some of the signatories. 

The SAB 121 repeal bill was vetoed by President Joe Biden in June after it received bipartisan support in the House and Senate.

The House then failed to overturn that veto on July 10 — falling 60 votes short of the two-thirds majority needed for it to move to the Senate. 

Magazine: Godzilla vs. Kong: SEC faces fierce battle against crypto’s legal firepower