The U.S. Senate has joined forces with the House of Representatives to nullify the Securities and Exchange Commission’s (SEC) controversial crypto policy known as Staff Accounting Bulletin No. 121 (SAB 121).
The Senate vote of 60-38 in favor of overturning the policy comes despite President Joe Biden’s vow to veto the resolution, citing concerns over investor protection and financial system stability.
The bipartisan effort saw a dozen Democrats aligning with the majority of Republicans to support the resolution, easily surpassing the simple majority needed for passage. However, the vote count fell short of making the resolution veto-proof. Notable Democratic leaders, including Senate Majority Leader Chuck Schumer (D-N.Y.), opposed the SEC’s crypto policy.
Sen. Cynthia Lummis (R-Wyo.), a key proponent of the resolution, called SAB 121 “a disaster” and criticized its lack of consumer protection. She also said:
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 and marks the first time both chambers of Congress have passed standalone crypto legislation. President Biden needs to take note of the bipartisan support this CRA received in both the House and Senate and sign this into law.
Issued in 2022, SAB 121 required companies holding customers’ cryptocurrencies to record them on their own balance sheets, potentially having significant capital implications for banks working with crypto clients. Republicans argued that the SEC overstepped its authority by implementing the policy without following proper rulemaking procedures, a stance supported by the Government Accountability Office.
The SEC defended SAB 121 as non-binding staff guidance aimed at enhancing investor disclosure, citing instances of crypto firm failures and customers lining up in bankruptcy courts to reclaim their assets.
The Congressional Review Act, which allows Congress to overturn federal rules, was the vehicle used by lawmakers to challenge SAB 121. Rep. Mike Flood (R-Neb.), a key architect of the resolution, praised the bipartisan support and urged President Biden to reconsider his veto threat.
Democrats join in opposition
Rep. Wiley Nickel (D-N.C.), a co-sponsor of the House resolution, reiterated his call for the SEC to withdraw the bulletin before it reaches the President’s desk, emphasizing that Congress will not tolerate the SEC’s deliberate circumvention of the rulemaking process and overreach of regulatory authority.
Apart from a previous crypto taxation provision in an infrastructure law, this marks the first time Congress has taken action on a crypto-focused issue to aid the industry. The White House has expressed concerns that a successful reversal could constrain the SEC’s ability to ensure appropriate guardrails and address future crypto-related issues, including financial stability.
As the resolution heads to President Biden’s desk, the fate of SAB 121 and the broader implications for the crypto industry remain uncertain. Crypto is not in the sights of just United States regulators, with Chinese authorities recently arresting 193 suspects for alleged involvement in illegal crypto services, days after another such case.
