Blockchain
US House Set to Vote on Eliminating SEC Crypto Policy as President Biden Vows Veto
The U.S. House of Representatives voted in favor on Wednesday a resolution rejecting Securities and Exchange Commission (SEC) cryptocurrency accounting guidelines that the industry says have dissuaded banks from handling crypto clients, but President Joe Biden is already promising he will veto it if it hits his desk.
SEC Staff Accounting Bulletin No. 121, also known as SAB 121, has been the focus of criticism from digital asset companies and Republican lawmakers since its arrival. The bulletin was intended to clarify the accounting treatment of cryptocurrencies, ordering a bank that holds customer digital tokens to do so on its balance sheet, potentially incurring large capital expenditures. But the policy guidelines in a government review have since been found to have been mishandled, although the agency and chairman Gary Gensler have defended them.
“Gary Gensler, in his jihad against digital assets, has used what should be a banal staff accounting guide to essentially prevent large, publicly traded banks from taking custody of digital assets,” said Congressman Mike Flood ( R-Neb.), the effort’s sponsor, in a Wednesday interview with CoinDesk. And the SEC didn’t consult with banking regulators about it, Flood pointed out, arguing that Gensler has “no business in the banking world.”
The White House believes the policy deserves to be defended with a veto, according to a statement from Biden.
“SAB 121 was issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers,” Biden said he said in a statement Wednesdaystating that he “strongly opposes” stopping the SEC’s work on the matter.
Despite this, the House vote went strongly in favor of the resolution, including support from 21 Democrats who were unmoved by Biden’s threat.
The SEC’s accounting policy “made a mockery of the regulatory process and ignored other regulatory agencies,” said Rep. Patrick McHenry (R-N.C.), chairman of the House Financial Services Committee. a speech in the House last Wednesday, calling SAB 121 “a massive departure from how highly regulated banks are traditionally required to process assets on behalf of their customers.”
But a top House Democrat thought the resolution went too far.
“This bill takes a sledgehammer to solve a problem that might simply require a scalpel, and it does so because my colleagues across the aisle are not only interested in carrying out the orders of special interest groups, they are also interested to attack and undermine the SEC in every way possible,” said Rep. Maxine Waters (D-California), the ranking Democrat on McHenry’s committee.
SAB 121 was originally introduced as staff guidance, but a subsequent Government Accountability Office (GAO) review determined that the agency should administer it as a rule, with full public comment and submission to Congress.
Rep. Flood introduced the resolution to formally disapprove the regulator’s guidance along with two Democrats, and Sen. Cynthia Lummis (R-Wyo.) pushed for a corresponding resolution in the Senate, which would be needed before the joint resolution could make it to the floor. Biden’s desk.
When an agency rule is reversed under the Congressional Review Act, not only is it deleted, but anything similar is blocked from future implementation forever. Waters argued that SAB 121, aside from the controversial custody component, also provides guidance on crypto disclosures that are required and would be threatened if Congress overturns the policy, and Biden echoed the concern about the policies that would be blocked.
“By virtue of relying on the Congressional Review Act, this could also inappropriately limit the SEC’s ability to ensure adequate guardrails and address future issues related to crypto-assets, including financial stability,” Biden said. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty.”
Flood called it “disappointing” that the president would approve the misuse of a bulletin to do federal regulatory work for all purposes. He said he and his allies will “look at every single vehicle between now and the end of the year that goes to the president’s desk and add this language there.”
UPDATE (8 May 2024, 10.11pm UTC): Updates with the vote in the Chamber for the approval of the resolution.