Regulation
Biden Administration to Veto Rollback of Controversial SEC Crypto Rules
The Biden administration declared the May 8 that he would veto HJ Res. 109, which seeks to overturn the SEC’s Staff Accounting Bulletin 121 (SAB 121).
The administration said it “strongly opposed” the resolution because the change would interfere with the SEC’s efforts to protect crypto market investors and safeguard the financial system. The administration added that the SEC issued the bulletin because of demonstrated risks that caused customer losses, and that it reflects “the considered opinions of SEC staff.”
The Biden administration has said lawmakers’ invocation of the Congressional Review Act would inappropriately control the SEC’s ability to create guardrails and resolve crypto issues. Such limits would introduce financial instability and market uncertainty.
The opinion concluded:
“If the President were to receive HJ Res. 109, he would veto it.
The House must vote
The US House of Representatives is expected to vote on the resolution on May 8.
Chairman of the House Financial Services Committee Patrick McHenry statements made supporting the resolution, calling SAB 121 “one of the most egregious examples” of SEC overreach under his current presidency, Gary Gensler.
He claimed the agency was avoiding public comment and the rulemaking process as required by the Administrative Procedure Act (APA) by labeling staff guidance requirements.
McHenry called SAB 121 “cost-prohibitive” for banks aiming to provide custody of customers’ cryptocurrencies and warned that reducing bank participation could leave users’ assets vulnerable.
Representative Tom Emmer also supported overturning SAB 121. Congressman Mike Flood initially sponsored the resolution.
Implications for industry
SAB 121 requires financial institutions and companies that safeguard customers’ crypto to hold the assets on their balance sheet.
SAB 121 also has received a refusal within the banking sector itself. The American Bankers Association (ABA) said in February that the policy has posed challenges since its introduction in 2022.
The ABA highlighted two main issues: SAB 121 makes it “virtually impossible” for banks to act as custodians of spot Bitcoin ETFs due to reserve and capital requirements, and the bulletin does not distinguish between cryptos on public ledgers and traditional assets on permissioned ledgers.
Despite its dissatisfaction with the current rules, the ABA asked the SEC to amend SAB 121 rather than rescind it entirely.