On May 16, the Senate is expected to vote on a House resolution to overturn the US Securities and Exchange Commission's (SEC) Staff Accounting Bulletin 121 (SAB 121).
This bulletin has faced criticism for its approach to how businesses should account for cryptocurrency assets.
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SAB 121 was intended to guide businesses on accounting crypto assets, instructing them to include them on their balance sheets. However, critics argue that this discourages major custodians and companies from holding crypto assets on behalf of customers.
The House of Representatives recently voted to reject this guidance, advancing the resolution to the Senate. If the Senate passes the resolution and President Joe Biden signs it, SAB 121 would be nullified, and the SEC would be prevented from issuing similar directives in the future.
Co-sponsor of the resolution representative Wiley Nickel previously reached out to SEC Chair Gary Gensler, seeking a dialogue about SAB 121, but received no response. In his letter, Nickel urged the withdrawal of SAB 121 to protect investors, enhance financial system stability, and uphold Congress's regulatory role. He wrote:
Acting now to withdraw SAB121, before it passes in the Senate, to allow for the custodial banking of digital assets would be a positive step toward a balanced regulatory approach to cryptocurrency.
Senator Kirsten Gillibrand has also expressed support for the resolution, pointing out that the rule was issued without proper consultation with regulatory agencies or Congress and lacked a formal notice and comment period. She argued:
<SAB 121> imposes an accounting approach that deviates from established standards, forcing financial institutions to count their customers’ digital assets as their own. This will limit options for consumers and leave them with less, not more consumer protection in cases of bankruptcy.
However, the White House has threatened to veto the resolution, arguing that it reflects the SEC staff's views. A veto statement warned that the resolution could hinder the SEC's ability to implement safeguards and manage future crypto-asset-related issues.
Despite the veto threat, the resolution received strong support in the House, with 21 Democrats and most Republicans voting in favor. Representative Mike Flood, another one of the resolution's sponsors, expressed optimism about the Senate vote, stating:
We're hopeful that it passes the Senate this week, and I think it's getting the SEC's attention that we're serious.
Ron Hammond, director of government relations at the Blockchain Association, also highlighted the expected bipartisan support for the resolution while acknowledging the looming threat of a presidential veto. He said:
We encourage the veto to be reconsidered, allowing this harmful, anti-crypto provision to be struck down.
While the White House's veto threat remains a hurdle, Congress's bipartisan support suggests strong opposition to the SEC's current stance on crypto regulation.
This stance has been marked by legal action taken against various crypto firms, including Robinhood and Ripple, citing securities violations.
