Regulation
Biden administration warns against rolling back SEC crypto rule
The U.S. House of Representatives took an important step toward overhauling digital asset regulation by passing Rep. Mike Flood’s bipartisan HJRes resolution. 109, May 8. This resolution seeks to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121, which has been a point of contention within the financial and crypto communities.
Supporters of the bill argue that the SEC rule burdens financial institutions. They say this makes the role of digital asset custodian too costly.
Legislative support versus presidential veto: the battle over SAB 121
Under SAB 121, issued in March 2022, financial institutions must include customers’ digital assets on their balance sheets. Critics argue that this accounting requirement leads to significant operational and financial challenges. These challenges affect businesses that hold cryptocurrencies and other digital assets.
In overturning SAB 121, supporters of HJRes. 109 believe this will remove regulatory barriers. This will in turn facilitate safer and more efficient digital asset transactions through regulated banks and financial institutions. Congressman Patrick McHenry highlighted the practical implications of SAB 121.
“If you want U.S. assets to be protected, they need to be kept and not put on the bank’s balance sheet. […] And finally, if you want to send the message that rogue regulators cannot circumvent Congress in our well-established rulemaking process, vote yes,” said Congressman McHenry.
Learn more: How does regulation impact crypto marketing? A complete guide
THE resolution has garnered support from various industry sectors and lawmakers who believe the SEC rule represents an overreach of regulatory powers. This sentiment is echoed by House Majority Whip Tom Emmer, who emphasized the non-partisan nature of digital asset innovation.
“We need to work this way in Congress to ensure that the digital asset ecosystem can thrive here in the United States,” Emmer asserted.
However, opposition to this resolution comes from the highest levels of government, including the President. Joe Biden administration. They argue that rescinding SAB 121 would weaken the SEC’s ability to protect investors and the financial system as a whole from the risks associated with crypto assets.
“Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce significant financial instability and uncertainty into the market.” If the President were to receive HJ Res. 109, he would veto it,” The White House declared.
Lawmakers Slam SEC Crypto Crackdown
Criticism of recent SEC actions extends to its management of major crypto platforms. For example, the SEC’s publication of Wells’ advice to platforms like Robinhood has been described by some lawmakers as an overexpansion of its regulatory mandate. U.S. Representative John Rose argued that such actions go beyond the SEC’s role of maintaining order markets and protect investors.
“The SEC exceeded its mandate to protect investors and maintain fair and orderly markets by issuing a Wells Notice to Robinhood, a precursor to enforcement action. I am proud to help lead the effort to bring clarity by passing the FIT for the 21st Century Act so that rogue regulators like Gary Gensler can focus on their mandate to protect investors and not disrupt innovation said Congressman Rose. said.
SEC Chairman Gary Gensler defended its strict regulatory approach in an interview with CNBC. It aims to subject the crypto sector to stricter control.
Gensler spoke about the SEC’s oversight of a $110 trillion capital market. He considers cryptocurrencies to be subject to scams and fraud.
However, Gensler was reluctant to question whether Ethereum (ETH) is a commodity or security. Instead, it focuses on the lack of necessary disclosure to investors and criticizes the practices of intermediaries in centralized crypto markets.
SEC Commissioner Mark Uyeda criticized this position. FOX reporter Eleanor Terrett reported that Uyeda stressed the need for an innovation-friendly regulatory framework.
Learn more: What does it mean to receive a Wells Notice from the SEC?
“Even though the simplest regulatory response to crypto and digital asset innovation is to use bad actors as an excuse to “stop everything,” regulators should create a compliance pathway for legitimate efforts. The SEC has not yet developed this path,” Uyeda explain.
As HJRes. 109 moves to the Senate, the implications of its potential approval weigh heavily on the regulatory environment for digital assets. This highlights the ongoing debate between regulation and innovation in the crypto sector.
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