Regulation
How Biden Just Angered the Crypto Industry Over an Obscure SEC Action – DL News
- President Joe Biden is facing backlash after saying he would veto a pro-crypto resolution.
- The resolution seeks to reverse a controversial SEC policy.
- Critics say the SAB 121 policy risks imposing unfair compliance costs on crypto.
US President Joe Biden frustrated the crypto community on Wednesday by declaring that he veto a bill which has just been adopted by the lower house of Congress.
The bipartisan resolution seeks to repeal a controversial Securities and Exchange Commission accounting policy called Staff Accounting Bulletin No. 121, or SAB 121.
“There is nothing less American than politicians who hinder innovation and progress,” Hunter Horsley, CEO of crypto investment firm Bitwise Asset Management, said Wednesday.
“Frustrating posturing from the White House here,” he said.
Likewise, Paul Grewal, chief legal officer of crypto exchange Coinbase, labeled the threat of veto as “inexcusable”.
The latest crypto clash in Congress highlights the divide between the pro- and anti-industry camps on Capitol Hill as the United States prepares for November’s presidential election.
While Biden has positioned himself squarely in the anti-crypto camp, his main rival for the presidency Donald Trump spent Wednesday calling on crypto supporters to vote for him if they want the industry to thrive in the United States.
This comes as the SEC – led by Chairman Gary Gensler – has pursued crypto companies for allegedly operating as unregistered securities entities in a series of enforcement actions.
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The crackdown led crypto experts to call for Gensler’s removal, calling his actions regulatory overrun.
What is SAB 121?
SAB 121 is part of Gensler’s attempt to bring the industry into line.
The policy requires financial institutions holding digital assets on behalf of clients to record these assets as liabilities on their balance sheet.
Since March 2022, banks and custodians have been required to hold additional capital to offset these liabilities, which the industry says puts unfair pressure on their capital ratios and drives up administrative costs.
SAB 121 makes it “extremely” difficult for custodians to hold digital assets, Ji Kim, legal and policy director at advocacy group Crypto Council for Innovation, said Wednesday.
“The SEC’s attempt to circumvent established regulatory processes under the guise of issuing ‘staff-level guidance’ undermines the trust and due diligence expected in regulatory practices,” Kim said.
Republican Congressman Mike Flood sought to overturn SAB 121 with his resolution HJ Res 109what was vote by the House of Representatives on Wednesday.
Whatever celebratory mood may have spread through the pro-crypto camp after the vote proved short-lived after the White House announced that Biden would veto the bill if he arrived one day on his desk in the Oval Office.
The administration said the resolution risked hindering the SEC’s ability to “protect investors» and “limit” its ability to ensure financial stability.
Crypto champions have already accused the Biden administration’s policies of stifling innovation and failure to provide a clear regulatory framework for the crypto industry.
Since the collapse of FTX in November 2022, the crypto industry has made some effort reinforce more secure practices for storing customers’ digital assets, advocating for regulation.
Sebastian Sinclair is markets correspondent for DL News. Do you have any advice? Contact Seb at sebastian@dlnews.com.