Bitcoin
Biden Administration to Veto Overturning Controversial SEC Crypto Rules
The Biden administration said in May 8 which would veto HJ Res. 109, which seeks to nullify the SEC’s Staff Accounting Bulletin 121 (SAB 121).
The administration said it “strongly opposes” the resolution as the move will interfere with the SEC’s efforts to protect investors in the crypto market and safeguard the financial system. Management added that the SEC issued the bulletin due to demonstrated risks causing customer losses and reflects “considered views of SEC staff.”
The Biden administration said lawmakers’ invocation of the Congressional Review Act would inadequately control the SEC’s ability to create guardrails and resolve crypto issues. Such limits would introduce financial instability and uncertainty into the market.
The notice concluded:
“If the president were presented with HJ Res. 109, he would veto it.”
Chamber scheduled for vote
The US House of Representatives is scheduled to vote on the resolution on May 8.
Chairman of the House Financial Services Committee Patrick McHenry statements delivered supporting the resolution, calling SAB 121 “one of the most egregious examples” of SEC overreach under its current chairmanship, Gary Gensler.
He said the agency avoided public comment and the rulemaking process required by the Administrative Procedure Act (APA) by labeling requirements for staff guidance.
McHenry called SAB 121 “cost prohibitive” for banks aiming to provide custody for customers’ crypto and warned that reducing banks’ participation could leave users’ assets vulnerable.
Representative Tom Emmer has also supported the overturn of SAB 121. Congressman Mike Flood initially sponsored the resolution.
Industry Implications
SAB 121 requires financial institutions and companies that secure customers’ crypto to hold the assets on their balance sheets.
SAB 121 also received resistance from within the banking sector itself. The American Bankers Association (ABA) said in February that the policy has posed challenges since its introduction in 2022.
The ABA noted two main problems: SAB 121 makes it “virtually impossible” for banks to act as custodians of spot Bitcoin ETFs due to reserve and capital requirements, and the bulletin fails to distinguish between cryptocurrencies on public ledgers and assets traditional in authorized ledgers.
Despite its dissatisfaction with the current rules, the ABA asked the SEC to modify SAB 121 rather than overturn it entirely.