Senate Strikes Back: SEC’s Crypto Accounting Rule on the Chopping Block

In a significant development for the cryptocurrency industry, the U.S. Senate has voted 60-38 to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121).

The controversial rule, which imposes regulatory burdens on digital asset custodians, has faced criticism from the crypto community for potentially hindering the ability of banks to safeguard digital assets.

TLDR

• The U.S. Senate voted 60-38 to overturn the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), which imposes regulatory burdens on digital asset custodians.
• The House of Representatives had previously passed the same resolution, and it now awaits President Biden’s decision.
• The White House has indicated that President Biden would veto the resolution if presented to him, citing concerns about limiting the SEC’s ability to maintain a comprehensive regulatory framework for crypto assets.
• The vote garnered bipartisan support, with several Democrats, including Senate Majority Leader Chuck Schumer, voting in favor of repealing SAB 121.
• The crypto industry has been critical of SAB 121, arguing that it could prevent banks from safeguarding digital assets by requiring firms to record customer crypto holdings as liabilities on their balance sheets.

The Senate’s vote follows the passage of the same resolution in the House of Representatives, marking the first time Congress has passed standalone crypto legislation.

The resolution, H.J. Res. 109, aims to eliminate the regulatory obstacles that prevent highly regulated financial institutions and firms from acting as custodians of digital assets.

Despite the bipartisan support for repealing SAB 121, with several Democrats, including Senate Majority Leader Chuck Schumer, voting in favor, the resolution faces a potential veto from President Joe Biden.

The White House has previously indicated that the President would veto the resolution if presented to him, citing concerns about limiting the SEC’s ability to maintain a comprehensive and effective regulatory framework for crypto assets.

The SEC’s SAB 121 requires firms that custody crypto to record customer crypto holdings as liabilities on their balance sheets.

Critics argue that this rule could deter banks from offering crypto custody services, thereby hindering the growth and adoption of digital assets.

Senator Cynthia Lummis (R-WY), a vocal supporter of the resolution, called SAB 121 a “misguided rule” and praised the Senate’s vote as a

“win for financial innovation and a clear rebuke of the way the Biden admin and Gary Gensler have persecuted crypto.”

She urged the public to speak up and let the White House know their stance on the matter.

We are so ₿ack. pic.twitter.com/ckHmXMHFL8

— Senator Cynthia Lummis (@SenLummis) May 16, 2024

As the resolution makes its way to President Biden’s desk, the crypto industry awaits his decision. A veto would likely face criticism from the industry and could potentially prompt override attempts in Congress and could also affect Biden’s re-election campaign.

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