Bitcoin
US House Set to Vote on Eliminating SEC Crypto Policy as President Biden Vows to Veto
The US House of Representatives voted on Wednesday to approve a resolution rejecting Securities and Exchange Commission (SEC) cryptocurrency accounting guidance that the industry says has dissuaded banks from dealing with crypto clients, but President Joe Biden is already promising he will veto the effort if it reaches his desk.
The SEC’s Personnel 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 purpose of the bulletin was to clarify the accounting treatment for crypto assets, advising that a bank holding customer digital tokens should do so on its own balance sheet, potentially incurring huge capital expenditures. But a government review has since concluded that the policy guidance was mishandled, even though the agency and Chairman Gary Gensler defended it.
“Gary Gensler, in his jihad against digital assets, used what should have been mundane staff accounting guidance to essentially block large, publicly traded banks from taking custody of digital assets,” said Rep. Mike Flood (R-Neb. ), the deputy. sponsor of the effort, in an interview Wednesday with CoinDesk. And the SEC didn’t consult banking regulators about it, Flood highlighted, arguing that Gensler “has no business in the banking world.”
The White House considers the veto policy worth defending, according to a statement from Biden.
“SAB 121 was issued in response to proven technological, legal and regulatory risks that have caused substantial losses to consumers,” Biden said in a statement on Wednesdaysaying it “strongly opposes” stopping the SEC’s work on this matter.
Despite this, the vote in the House was 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 (RN.C.), chairman of the House Financial Services Committee, in a speech in the Chamber plenary on Wednesday morning, calling SAB 121 “a huge departure from the way highly regulated banks are traditionally required to handle assets on behalf of their customers.”
But a top House Democrat said the resolution went too far.
“This bill requires a sledgehammer to solve a problem that may only need a scalpel, and it does so because my colleagues across the aisle are not only interested in making proposals to special interest groups, but also in attacking and undermining the SEC in every way possible,” said Rep. Maxine Waters (D-Calif.), the top Democrat on McHenry’s committee.
SAB 121 was originally introduced as guidance for staff, but a subsequent Government Accountability Office (GAO) review determined that the agency should have treated it as a rule, with full public comment and submission to Congress.
Rep. Flood introduced the resolution to formally disapprove of the regulator’s guidance alongside two Democrats, and Sen. Cynthia Lummis (R-Wyo.) has been pushing for a corresponding resolution in the Senate, which would be needed before the joint resolution could be passed . to Biden’s desk.
When an agency rule is reversed under the Congressional Review Act, it is not only erased, but anything similar is forever locked for future implementation. Waters argued that SAB 121 — in addition to the controversial escrow component — also provided guidance on crypto disclosures that are necessary and would be threatened if Congress overturned the policy, and Biden echoed the concern about policies that would be blocked.
“By virtue of invoking the Congressional Review Act, it could also unduly restrict the SEC’s ability to ensure appropriate protections and address future issues related to cryptoassets, including financial stability,” Biden said. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for cryptoassets would introduce substantial financial instability and market uncertainty.”
Flood called it “disappointing” that the president would approve the misuse of a bulletin to do the work of a full federal regulation. He said he and his allies will “look at every vehicle between now and the end of the year that will go to the president’s desk and add this language there.”
UPDATE (May 8, 2024, 10:11 pm UTC): Updates with the vote in the Chamber to approve the resolution.