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House Republicans are gearing up to challenge the SEC’s controversial rule regarding digital asset custody, labeling it as an overreach of the agency’s authority.

During a press conference on May 7, Representative Tom Emmer, a prominent Republican lawmaker, criticized SEC Chairman Gary Gensler’s tenure, calling it marked by “regulatory hypocrisy, inconsistency, and incompetence.”

The issue at hand, known as Staff Accounting Bulletin 121 (SAB 121), has been criticized for overstepping boundaries and displaying bias against the digital asset ecosystem.

The SEC introduced SAB 121 more than two years ago, labeling it as guidance. The rule, which aims to regulate how banks safeguard consumer-owned digital assets, was described as an attempt to expand the SEC’s authority while sidestepping Congress and public input.

Emmer argued that the rule is not only overreaching but also illegal and violates the SEC’s statutory mission. According to him, SAB 121 increases concentration risk in the digital asset ecosystem, making markets less fair and efficient.

The rule also restricts American investors from using established banking infrastructure for digital asset custody, increasing vulnerability if a custodian becomes insolvent. Additionally, the rule allegedly hampers capital formation and global competitiveness, as foreign banks are allowed to compete in crypto markets while US banks are restricted.

Emmer argued that Chairman Gensler is violating all three objectives with SAB 121. He added:

“The SEC’s statutory mission is to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets.”

Later this week, House Republicans plan to pass Congressman Mike Flood’s resolution to rescind the rule. They urged bipartisan support, emphasizing the importance of a thriving digital asset ecosystem in the United States.

Emmer said:

“We hope that our colleagues on the other side of the aisle will join us in this effort.”

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