Congress Passes Anti-SEC Crypto Rule Resolution, Braces for White House Veto

An SEC accounting rule that required US banks and other public companies to record people’s digital assets on their balance sheets has been vehemently condemned by US Senators this week. The Senate voted 60 to 38 on May 16 in favour of a joint resolution to strike down the rule known as Staff Accounting Bulletin No. 121 (SAB 121). 

However, support for overturning the rule came despite US President Joe Biden’s opposition to the resolution and vowed earlier this month to veto it. Biden said removing the policy would disrupt the SEC’s efforts “to protect investors in crypto-asset markets and to safeguard the broader financial system.”

Because the resolution didn’t receive enough votes to make it veto-proof, it may have to return to Congress and gain a two-thirds majority vote to pass again.

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Calls For Biden To “Do The Right Thing” 

Representative Mike Flood, who sponsored the resolution to disapprove the rule said it was clear there was overwhelming opposition to SAB 121. “I urge POTUS to reconsider his previous statement of intent to veto the resolution,” Flood posted on X after the vote.

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. Mike Flood, US House of Representatives

Senator Cynthia Lummis called the vote “historic”, urged Biden to “do the right thing”, and also specifically called out the SEC’s Gary Gensler:

The US Blockchain Association described the 60 “Yeas” in favour of repealing the resolution in the Senate “stunning”, and said a Presidential veto was out of step with what voters want. 

SEC Accounting Rule: Necessary Safeguard? 

SAB 121 was published by the SEC in March 2022, and clarifies that crypto held in custody for customers by private companies should be accounted for as liabilities on the firm’s balance sheets due to the risk they pose. Critics of the policy say it discourages institutional involvement in digital assets and places onerous capital requirements on publicly-traded banks to provide custodial services. 

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In addition to maintaining SEC oversight of firms’ accounting obligations with regard to safeguarding crypto assets, the President’s office said keeping SAB 121 in place was important because it “…was issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers.”

In contrast to support for the repeal of SAB 121, Senator Elizabeth Warren took to the Senate floor to condemn the fact the vote was occurring at all, saying it was outside the scope of the Congressional Review Act (CRA). But the SEC’s bulletin was characterised as a ‘rule’ open to congressional review under the CRA in October 2023 by the US Government Accountability Office.