Congressman Wiley Nickel (D-CA) has publicly rebuked SEC Chair Gary Gensler for what he perceives as the agency's "open hostility" towards the crypto industry and its controversial Staff Accounting Bulletin 121 (SAB121). In a letter addressed to Gensler on Wednesday, Nickel urged the SEC to rescind SAB121, particularly in light of the ongoing Senate vote aimed at nullifying it.

Nickel's letter emphasized the need to withdraw SAB121 to safeguard investors, enhance American competitiveness, and respect Congress's role in the administrative rulemaking process. He argued that repealing the bulletin would represent a positive step towards achieving a balance in crypto regulation and facilitating digital asset custodial banking.

SAB121, which provides guidance on digital asset accounting, has faced prolonged criticism for imposing stringent capital requirements on banks seeking to enter the crypto space. Financial institutions participating in crypto activities are mandated to disclose clients' liabilities alongside custodied digital assets on their balance sheets, a measure that has drawn backlash from industry stakeholders.

The approval process of SAB121 has also come under scrutiny from U.S. lawmakers, with the Government Accountability Office (GAO) finding that the SEC failed to report the rule change under the Congressional Review Act (CRA).

Last week, the House passed H.J. Res 109, a bill introduced by Nickel and Representative Mike Flood (R-NE) aimed at invalidating SAB121. Following the House vote, Senator Cynthia Lummis (R-WY) has led efforts in the Senate to nullify the contentious accounting bulletin.

Nickel's letter to Gensler comes amidst President Joe Biden's indication of a potential veto against legislative attempts to overturn SAB121. Biden cited concerns about technological, legal, and regulatory risks that could lead to substantial losses for consumers.

As the Senate vote on Lummis' companion legislation approaches, Nickel's letter serves as a final appeal to Gensler to rescind SAB121 before it potentially reaches Biden's desk for consideration.

The outcome of this legislative battle will likely have significant implications for the future regulatory landscape of the crypto industry, as policymakers and regulators grapple with striking a balance between innovation and investor protection.