House Votes to Erase SEC Crypto Policy While President Biden Vows Veto

The House resolution begins a formal process to eliminate the Securities and Exchange Commission’s controversial accounting policy on crypto custody.

President Joe Biden has said he would veto the resolution if it reaches his desk for approval.

The U.S. House of Representatives voted on Wednesday to approve a resolution rejecting cryptocurrency accounting guidance from the Securities and Exchange Commission (SEC) that the industry says discourages banks from dealing with crypto customers, but President Joe Biden is already promising to veto the effort. his desk.

The SEC’s 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 publication. The purpose of the bulletin was to clarify accounting practices for crypto assets, directing that a bank that holds a customer’s digital tokens should do so on its own balance sheet, potentially leading to large capital expenditures. But although the agency and Chairman Gary Gensler defended it, the policy guidance has since been revealed to have been poorly handled in a government review.

“In his jihad against digital assets, Gary Gensler used what was supposed to be ordinary staff accounting guidance to prevent large publicly traded banks from acquiring digital assets,” said Rep. Mike Flood (R-Neb.). sponsor of the effort, said in an interview with CoinDesk on Wednesday. Flood argued that Gensler “has no business whatsoever in the banking world,” noting that the SEC did not consult with banking regulators on the matter.

According to the statement made by Biden, the White House sees the policy as worth defending with a veto.

“SAB 121 was issued in response to proven technological, legal and regulatory risks that have caused significant losses to consumers,” Biden said in a statement Wednesday. he said and said he “strongly objected” to the SEC’s disruption of its work on this issue.

Despite this, the House vote was strongly in favor of the resolution, including support from 21 Democrats who were unimpressed by Biden’s threat.

Rep. Patrick McHenry (R.N.C.), chairman of the House Financial Services Committee, said the SEC’s accounting policy “makes a joke of the rulemaking process and ignores other regulatory agencies.” A speech on the floor of parliament Earlier Wednesday, he called SAB 121 a “major departure from the way highly regulated banks have traditionally been required to process assets on behalf of their customers.”

But a key Democrat in the House of Representatives thought the resolution went too far.

The story continues

“This bill requires a sledgehammer to solve a problem that may only require a scalpel, and it does so because my colleagues on the other side of the aisle are not only doing the bidding of special interest groups, they are interested in attacking and undermining the SEC in every way possible,” McHenry was quoted as saying. The top Democrat on the committee is Rep. Maxine Waters (D-Calif.).

SAB 121 was initially introduced as staff guidance, but a subsequent review by the Government Accountability Office (GAO) determined that the agency should consider it as a rule, with full public comment, and submit it to Congress.

Read More: US Lawmakers Want to Change SEC’s Crypto Accounting Policy

Rep. Flood, along with two Democrats, introduced the resolution formally endorsing the regulator’s guidance, and Sen. Cynthia Lummis (R-Wyo.) is pushing for a matching resolution in the Senate, which would be needed before the joint resolution takes effect. To Biden’s desk.

Once a fiduciary rule is reversed under the Congressional Review Act, it is not only expunged, but it is forever barred from future enforcement of anything similar. 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 reiterated concerns about policies that would be blocked.

“Invoking the Congressional Review Act could also inappropriately restrict the SEC’s ability to take appropriate safeguards 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 lead to significant financial instability and market uncertainty.”

Flood called it “disappointing” that the president would approve the improper use of a bulletin to carry out full-fledged federal rulemaking. He said he and his allies “will be looking for every tool that gets to the president’s desk from now until the end of the year and insert this language in there.”

UPDATE (May 8, 2024, 22:11 UTC): Updates with House vote to approve the resolution.