Benzinga - by Murtuza Merchant, Benzinga Staff Writer.
The U.S. Senate joined the House of Representatives on Thursday in voting to overturn a policy implemented by the Securities and Exchange Commission (SEC) seen as hindering crypto adoption.
However, the effort faces a potential roadblock as President Joe Biden has threatened to veto the resolution.
What Happened: The contentious Securities and Exchange Commission (SEC) policy known as Staff Accounting Bulletin No. 121 (SAB 121), issued in 2022, mandates that companies holding customers’ cryptocurrencies must record them on their balance sheets, a requirement that could have severe capital implications for banks dealing with crypto clients.
Critics argue that this policy was implemented without the necessary rulemaking process, a stance supported by the Government Accountability Office.
President Biden expressed concerns that overturning SAB 121 would undermine efforts to protect crypto-asset investors and safeguard the broader financial system.
He stated that allowing the rule to be removed in this manner would disrupt critical regulatory work.
“A dozen Democrats joined the majority of Republicans in supporting the resolution, which easily surpassed the simple majority needed to pass,” the Senate announced.
Despite this, the resolution did not achieve the supermajority required to override a presidential veto.
Senate Majority Leader Chuck Schumer (D-N.Y.) and other Democratic leaders opposed the SEC’s crypto policy, highlighting bipartisan dissatisfaction with the bulletin.
Sen. Cynthia Lummis (R-Wyo.), a vocal critic of SAB 121 and a leading figure in the Senate’s push to repeal it, called the bulletin “a disaster” that fails to protect consumers.
“This is a win for financial innovation and a clear rebuke of the way the Biden administration and Chair Gary Gensler have treated crypto assets,” Lummis stated. “It marks the first time both chambers of Congress have passed standalone crypto legislation.”
The Congressional Review Act was utilized to challenge SAB 121, allowing Congress to overturn federal rules.
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Why It Matters: This approach has significant implications, as a successful reversal would legally prevent the SEC from pursuing similar policies in the future.
The White House warned that this could “inappropriately constrain the SEC's ability to ensure appropriate guardrails and address future issues related to crypto-assets.”
Rep. Kyle Flood (R-Neb.), a key architect of the resolution, emphasized the strong bipartisan opposition to SAB 121 and urged President Biden to reconsider his veto threat.
“It is clear there is overwhelming opposition to SAB 121, and I urge President Joe Biden to reconsider his previous statement of intent to veto the resolution,” Flood said. “The President should sign my resolution to ensure the SEC reverses course and sets America on a path to growing our digital financial future.”
Rep. Wiley Nickel (D-N.C.), a co-sponsor of the House resolution, echoed these sentiments, stating that Congress had no choice but to use the Congressional Review Act to address the issue.
“Today’s Senate vote to repeal SAB 121 sends a clear bipartisan message: Congress will not stand idly by as Gary Gensler and the SEC deliberately sidestep the statutory rulemaking process and overstep their regulatory authority,” Nickel said.
This legislative action marks a significant milestone, as it is the first time Congress has moved on a crypto-specific issue aimed at supporting the industry, aside from a previous crypto taxation provision included in an infrastructure law.
What’s Nextb: The ongoing debate over SAB 121 and its implications for the cryptocurrency market will be a central topic at Benzinga’s Future of Digital Assets event on Nov. 19.
The event will explore regulatory challenges and the future trajectory of digital assets, providing critical insights for stakeholders in the evolving crypto landscape.
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