US lawmakers vote in favor of repealing controversial SEC accounting rules for crypto

The US Senate voted in favor of repealing the SEC’s Staff Bulletin 121 (SAB 121) on May 16.

In all, 60 Senators voted in favor of HJ Res. 109, a resolution to overturn the bulletin, while 38 Senators voted against it.

The results show bipartisan support for reversing the SEC rule. Of the 60 Senators who voted in favor of the resolution, 11 were Democrats, 48 were Republicans, and one was independent.

Rep. Wiley Nickel commented that the latest vote “sends a clear bipartisan message” around the SEC’s alleged regulatory overreach. He added:

 “We never should’ve had to resort to using a (Congressional Review Act) to fix this issue, but unfortunately, it’s the only tool we have left.”

Congressman Tom Emmer endorsed a repeal of SAB 121, stating that crypto is “in a policy tug-of-war” between administrators and individuals, adding that a presidential veto would “kill opportunities for Americans at the expense of Americans.”

Biden will likely veto

On May 8, the Biden administration published a notice indicating that President Joe Biden would veto the resolution if the Senate votes in favor.

The administration warned that overturning SAB 121 could interfere with the SEC’s attempts to protect investors and safeguard the financial system.

On May 9, the House of Representatives voted 228 to 182 in favor of the resolution, passing it to the Senate.

The Senate and House votes both show that a majority of lawmakers are in favor of the resolution. However, the latest Senate vote is not high enough to override a presidential veto, which would require a two-thirds majority vote from both the Senate and the House.

SAB controversies

SAB 121 requires financial institutions and firms that safeguard their customers’ assets to keep these assets on their balance sheets.

The bulletin is controversial for a number of reasons. The American Bankers Association (ABA) believes SAB 121 makes it cost-prohibitive for banks to act as spot Bitcoin ETF custodians.

It also believes SAB 121 does not distinguish between crypto on public ledgers and traditional assets on permissioned ledgers. However, the association desires modifications rather than a complete repeal.

Lawmakers, meanwhile, have criticized the bill both on its contents and the SEC’s method of introducing the rule. Patrick McHenry arguing the SEC bypassed public comment and the rulemaking process through the use of staff guidance.

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