US Senate Abandons SEC Crypto Policy, But Biden Says He Will Veto: SAB 121 Explained

Lawmakers, crypto heavyweights and banking industry executives say an SEC policy on crypto custody and accounting hurts U.S. investors and stifles innovation, but Joe Biden is not ‘agreement.

Washington prepares for an all-powerful fight on a controversial subject SECOND decision.

There was a significant breakthrough last week, when the House of Representatives voted to repeal Staff Accounting Bulletin (SAB) 121.

What is SAB 121?

SAB 121 requires public companies to report and disclose obligations and risks related to protecting customers’ crypto assets. This policy is controversial because of its potential to complicate financial reporting and increase operational costs.

These rules were implemented in 2022 and have drawn heavy criticism from the entire crypto industry, as well as from banks who say the measures have effectively prevented them from offering crypto services. digital assets.

The US Senate voted on May 16 to rescind the SEC’s guidance, but critics of SAB 121 are not out of the woods yet.

The Senate’s decision must still receive the president’s approval. However, President Joe Biden has stated that he is prepared to veto the resolution to completely remove SAB 121. A statement from the White House made clear the administration’s support for SAB 121, saying:

“SAB 121 was issued in response to demonstrated technological, legal and regulatory risks that have caused substantial losses to consumers… Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce a substantial financial instability and market uncertainty. »

White House Statement

SEC faces retaliation

Some Democratic lawmakers have urged SEC Chairman Gary Gensler to withdraw SAB 121 on his own, rather than waiting for Congress to do so.

One of them is Congressman Wiley Nickel, representative of North Carolina’s 13th District, who says he is confident that Joint Resolution 109 will pass the Senate.

Nickel says getting rid of SAB 121 would better protect investors and ensure U.S. competitiveness on the global stage. Banks with a strong track record of providing custodial services would be able to extend their offering to cryptocurrencies. Considering crypto projects like Traveler And Celsius having failed to protect their clients’ assets even after SAB 121 took effect, some have argued that the regulations were ineffective from the start.

In a letter to GenslerDeputy Nickel declared:

“The SEC’s open hostility toward the digital assets industry does not serve President Biden’s best interests. The SEC is turning cryptocurrency regulation into a political football and forcing President Biden to choose sides on an issue that matters to many Americans.

Congressman Wiley Nickel

Nickel warned Gensler that SAB 121 amounts to a “prohibitively expensive regulatory burden” – and means that American consumers have no choice but to rely on “riskier offshore conservation solutions.”

Nickel went on to criticize the SEC’s approach to digital assets, calling it “misguided” – and highlighted his concerns with how SAB 121 was being applied. While personnel accounting bulletins are traditionally intended to serve as guidelines for best practices, he accused the commission of “violating the rulemaking process” because of the way they were used to promulgate regulations. new policies.

‘Madness’ — Consulting firm founder blames SAB 121 for FTX debacle

Austin Campbell, the founder of Zero Knowledge Consulting, called SAB 121 “madness” – not least because it was “unilaterally passed without consultation” and “undermines the rights of crypto holders in bankruptcy.” Campbell took to social media, declaring:

“It is entirely possible that this rule was part of the origin of FTX, because without it there could have been regulated custodians in the United States serving customers and exchanges, which would have prevented transactions personal and theft.”

Austin Campbell

He then warned that large financial institutions don’t like SAB 121 at all because they are excluded from the growing demand for exchange-traded funds based on the spot price of Bitcoin.

Cardano Founder Charles Hoskinson has also been highly critical of Biden’s stance on digital assets, saying his administration is trying to destroy the US crypto industry.

He went on to argue that it was inappropriate for the SEC to use 90-year-old legislation to regulate crypto, and that the heavy-handed approach to regulation has already forced a number of exchanges and trading platforms to legitimate to move elsewhere, for the benefit of rival economies. job creation and tax revenue.

With a veto looming on the horizon, this saga is far from over. It will be interesting to see how lawmakers on Capitol Hill – not to mention TradFi and crypto industry leaders – respond.

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