Regulation
Battle over crypto regulation intensifies as House passes key bills and Biden threatens veto
The Biden administration opposes H.R. 4763 while threatening to veto HJ Res. 109 amid crypto regulatory controversies.
In a week marked by significant developments in the cryptocurrency regulatory landscape, the Biden administration made clear its opposition to two key pieces of legislation affecting the digital asset market. These actions include the passage of H.R. 4763, the Financial Innovation and Technology for the 21st Century Act, by the House of Representatives, and the advancement of HJ Res. 109, a joint resolution to rescind Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 121 (SAB 121).
Opposition to HR 4763
HR 4763, led by Rep. Thompson (R-PA) and co-sponsored by eleven other Representatives, seeks to reshape the regulatory framework for digital assets in the United States. The bill passed the House on May 23, 2024, reflecting a concerted effort by lawmakers to tackle the booming digital currencies and assets industry.
However, the Biden administration has expressed strong opposition to the bill in its current form. A statement from the administration highlighted the need for a more balanced approach that incorporates comprehensive consumer and investor protections. The administration has expressed its willingness to work with Congress to develop legislation that not only promotes innovation but also ensures strong safeguards. The statement highlights that more time and discussions are needed to achieve a regulatory framework that adequately protects digital asset market participants.
Veto Threat on HJ Res. 109
Simultaneously, the administration issued a statement threatening to veto HJ Res. 109 if it reaches the President’s office. This joint resolution, introduced by Rep. Mike Flood (R-NE) and co-sponsored by Rep. Wiley Nickel (D-NC), seeks to overturn SAB 121 under the Congressional Review Act. SAB 121, issued by the SEC, requires financial institutions and companies holding digital assets such as cryptocurrencies to record these assets on their balance sheets. This requirement has been found to be costly by many regulated entities, potentially limiting their ability to offer cryptocurrency custody services.
While HR 4763 has a chance of becoming law, HJ Res. 109 will be vetoed, according to the Biden administration.
HJ Res. 109 passed the House on May 8, 2024, with a total of 228 votes in favor (207 Republicans and 21 Democrats) and 182 against (all Democrats). Supporters argue that rescinding SAB 121 will facilitate greater access to crypto services through regulated entities by removing the balance sheet constraint, thereby strengthening consumer protections.
However, the Biden administration strongly opposes the resolution, saying it would disrupt the SEC’s efforts to protect investors and maintain financial stability in crypto-asset markets. The administration emphasized that SAB 121 was a response to technological, legal and regulatory risks that have already resulted in significant losses for consumers. According to the administration, rescinding this bulletin would harm the SEC’s ability to implement necessary safeguards and manage future risks in the crypto market.
Legislative implications
As HJ Res. 109 is returned to the Senate for consideration, the possibility of a presidential veto adds a layer of complexity to the legislative process. The administration’s strong stance on H.R. 4763 and HJ Res. Resolution 109 highlights the crucial balance between promoting financial innovation and ensuring comprehensive regulatory oversight.
The outcomes of these legislative actions will significantly shape the future of digital asset regulation in the United States, influencing how institutions manage, curate, and innovate in the crypto space. As legislators, regulators and industry stakeholders continue to address these challenges, the need for a collaborative and balanced approach remains paramount.
For now, the administration’s clear opposition signals a cautious and measured path forward, prioritizing consumer protection and market stability amid rapidly evolving digital financial technologies.