The U.S. Senate has taken a significant step towards overturning the controversial Staff Accounting Bulletin No. 121 (SAB 121) issued by the Securities and Exchange Commission (SEC).
In a 60-38 vote, the Senate passed a resolution to repeal the SEC’s guidance, which required companies to record customers’ cryptocurrencies on their balance sheets.
TLDR
- The U.S. Senate voted 60-38 to overturn the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), which required companies to record customers’ cryptocurrencies on their balance sheets.
- 12 Democrats joined Republicans in voting for the resolution, defying President Biden’s veto threat.
- SAB 121 was criticized for being a non-binding guidance issued without proper rulemaking procedures, potentially constraining the SEC’s ability to regulate crypto assets.
- The resolution aims to remove barriers for regulated financial institutions to offer crypto custody services, addressing concerns over centralization risks.
- President Biden has vowed to veto the resolution, citing the need to protect investors and safeguard the financial system.
The vote marked a bipartisan effort, with 12 Democrats joining the Republican majority in defying President Joe Biden‘s veto threat.
The resolution had previously passed the House of Representatives, setting the stage for a potential showdown between Congress and the White House over the regulation of digital assets.
SAB 121, issued by the SEC in 2022, aimed to enhance disclosure requirements for firms that safeguard crypto assets on behalf of others.
BREAKING: 🇺🇸 Legislation that would overturn SEC rule preventing highly regulated financial firms from custodying #Bitcoin and crypto PASSES the Senate. pic.twitter.com/GDyJRCMCxy
— Bitcoin Magazine (@BitcoinMagazine) May 16, 2024
However, it faced widespread criticism from lawmakers and industry stakeholders, who argued that the guidance overstepped the SEC’s authority and failed to follow proper rulemaking procedures.
Senator Cynthia Lummis (R-Wyo.), a vocal advocate for the resolution, described SAB 121 as “a disaster” that did not adequately protect consumers.
She hailed the Senate’s vote as “a win for financial innovation and a clear rebuke of the way the Biden administration and Chair Gary Gensler have treated crypto assets.”
We are so â‚¿ack. pic.twitter.com/ckHmXMHFL8
— Senator Cynthia Lummis (@SenLummis) May 16, 2024
Proponents of the resolution argue that overturning SAB 121 is crucial for enabling regulated financial institutions to offer crypto custody services.
This move is seen as a step towards addressing concerns over centralization risks, as currently, a few institutions hold a significant portion of the bitcoins backing the recently approved spot Bitcoin Exchange Traded Funds (ETFs).
Critics of SAB 121, including Rep. Mike Flood (R-Neb.), have urged President Biden to reconsider his veto threat, citing the overwhelming bipartisan opposition to the SEC’s guidance.
They argue that the resolution paves the way for the United States to grow its digital financial future and foster innovation in the crypto industry.
However, the Biden administration has remained firm in its stance, citing the need to protect investors and safeguard the broader financial system.
In a statement, the White House argued that overturning SAB 121 could “inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets, including financial stability.”
The SEC, for its part, has defended SAB 121 as a non-binding guidance that enhances disclosure to investors in firms that safeguard crypto assets.
The agency has highlighted the importance of protecting consumers in the wake of high-profile crypto firm failures and bankruptcies.
As the resolution heads to President Biden’s desk, the crypto industry and lawmakers alike are bracing for a potential veto showdown.
If the President follows through on his veto threat, Congress would need a two-thirds majority in both chambers to override the veto and enact the resolution into law.
