The U.S. House of Representatives is poised to revisit a bill with the intention of overturning a controversial Securities and Exchange Commission (SEC) directive that has drawn criticism for inhibiting collaborations between crypto firms and banks. House Majority Leader Steve Scalise has placed the bill, previously rejected by President Joe Biden in May, on the agenda for reconsideration on July 9 or later.
Although the bill had garnered bipartisan support in both the House and Senate, securing the necessary two-thirds majority to override Biden’s veto presents a significant challenge.
In March 2022, the SEC issued Staff Accounting Bulletin No. 121 (SAB 121), advising financial institutions holding crypto assets on behalf of clients to treat them as owned assets on their balance sheets. This guidance faced backlash for discouraging traditional financial entities from offering large-scale crypto custody services.
House majority whip Tom Emmer went as far as deeming SAB 121 “illegal” and a departure from the SEC’s mandated objectives.
The Senate conducted a vote to annul this accounting guidance, which many critics argued was redundant and acted as a deterrent to investments. Despite the contentious nature of SAB 121, there was a strong bipartisan push for the bill's passage through Congress.
Lawmakers, investment firms, crypto investors, and even some skeptics of crypto—usually at odds on various issues—united in their call for SAB 121’s repeal. Their collective argument centered on the unequal treatment of crypto assets by banks compared to other assets, resulting in unnecessary complications and uncertainties.
Following President Biden’s veto, he posted a statement on the White House website justifying his decision. He stressed his administration’s stance against policies endangering consumer and investor welfare. Biden underscored that SAB 121 was crafted based on meticulous technical insights into the accounting responsibilities of companies safeguarding crypto assets.
Furthermore, Biden contended that revoking the directive would undermine the SEC’s overarching authority concerning accounting practices. He emphasized the importance of appropriate safeguards to shield consumers and investors—a critical element for maximizing the benefits of crypto innovation.
Biden also expressed his administration’s willingness to collaborate with Congress in formulating a comprehensive and fair regulatory framework for digital assets, leveraging existing powers to foster responsible growth and uphold U.S. leadership in the global financial realm.
With the House gearing up to reassess the bill, the crypto industry and its advocates are closely monitoring the potential gathering of adequate support to override the presidential veto and nullify SAB 121. The consequences of this reappraisal could drastically influence how banks navigate crypto assets and the trajectory of crypto custody services within the U.S.
