Senate Repeals SEC Crypto Rule; Biden’s Veto Imminent

The US Senate has taken a significant step by voting to pass H.J. Res 109, a resolution to overturn the SEC’s controversial Staff Accounting Bulletin No. 121 (SAB 121).

The Senate’s 60-38 vote follows the House of Representatives’ approval. This outcome reflects bipartisan support against the SEC’s crypto policy.

Bipartisan Effort Reverses SEC’s SAB 121

SAB 121, introduced in March 2022, requires financial institutions to list customers’ digital assets on their balance sheets. Critics argue this mandate creates substantial operational and financial burdens for firms handling cryptocurrencies. The policy has faced opposition for potentially exposing customers’ assets to risks in bankruptcy situations.

Senator Cynthia Lummis, a vocal pro-crypto advocate, spearheaded the resolution’s passage. During the hearing, she emphasized the dangers of SAB 121, explaining that placing customers’ assets on institutional balance sheets could jeopardize those assets during bankruptcies.

“SAB 121 puts consumers at risk by requiring a covered institution to place consumers’ assets on its balance sheet. It gives creditors a way to claim those assets in the event of bankruptcy. We have seen how this plays out for consumers. Their assets are frozen for months or even years while the bankruptcy plays out. In some cases, they lose their assets entirely. Now, they have entrusted these assets to the custodian, it is the custodian that is in bankruptcy, and yet their assets are the assets that are at risk. So, this does not protect consumers at all,” Senator Lummis said.

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In her speech, Senator Lummis also advocated for self-hosted wallets for digital assets. This stance aligns with her recent challenge to the Department of Justice’s views on non-custodial crypto services.

After the vote, Lummis expressed satisfaction on social media. She highlights the Senate’s decision as a victory for financial innovation and a rebuke of the current administration’s approach to crypto regulation.

“The Senate passing a [Congressional Review Act] CRA overturning SAB 121 is a win for financial innovation and a clear rebuke of the way the Biden administration and Gary Gensler have persecuted crypto. It also marks the first time Congress has passed standalone crypto legislation. We are just getting started,” Senator Lummis wrote on X (formerly Twitter).

The crypto community celebrated the Senate’s decision. Michael Saylor, founder of MicroStrategy and a well-known Bitcoin advocate, expressed his excitement on X. He emphasizes broad support for Bitcoin.

“Wall Street wants Bitcoin, the House of Representatives wants Bitcoin, and now the Senate wants Bitcoin,” he said.

Despite the resolution’s success in Congress, it did not secure enough votes to be veto-proof. President Joe Biden has vowed to veto the resolution. His administration argues that overturning SAB 121 would weaken the SEC’s ability to protect investors and the financial system from crypto-related risks.

However, lawmakers like Representative Mike Flood, who sponsored the resolution, continue to urge the president to reconsider.

“The President should sign my resolution to ensure the SEC reverses course and sets America on a path to growing our digital financial future,” Representative Flood added.

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Biden’s administration has recently intensified its regulatory stance against the crypto industry. In response, industry leaders are rallying support for pro-crypto political candidates.

Coinbase has launched a new political action committee (PAC) named “Stand With Crypto” to financially back crypto-friendly candidates. Prominent figures like Mark Cuban and Hayden Adams have also warned that Biden’s current stance could influence upcoming elections.