Congress Overturns SEC Crypto Rule as Biden Veto Looms: Implications for Blockchain Industry

On Thursday, 60 Senators voted in favor of H.J.Res. 109, a resolution that nullifies the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). This rule requires banks holding customers’ digital tokens to record them on their own balance sheets, a move that could lead to significant capital expenses for financial institutions. Critics argue that SAB 121 would stifle innovation and push the cryptocurrency industry towards more accommodating jurisdictions.

President Biden has expressed his intention to veto H.J.Res. 109 if it reaches his desk. He emphasized that SAB 121 was issued in response to the technological, legal, and regulatory risks that have resulted in substantial consumer losses. According to Biden, disrupting the SEC’s work could hinder the agency’s ability to implement necessary safeguards and address future issues related to crypto-assets, thereby introducing financial instability and market uncertainty.

The Congressional Review Act, invoked to challenge SAB 121, would prevent the SEC from reissuing a similar rule in the future if the resolution is successfully enacted. This legislative maneuver underscores the contentious nature of cryptocurrency regulation in the U.S. and the growing divide between the legislative and executive branches on this issue.

Despite the President’s opposition, the House of Representatives voted overwhelmingly in favor of the resolution on May 8, with significant bipartisan support. Now, with the Senate’s approval, the resolution moves to President Biden’s desk, where his threatened veto could further escalate the debate over cryptocurrency regulation.

The Blockchain Association, a prominent crypto advocacy group, hailed the Senate vote as a significant victory. They noted that the 60 ‘Yeas’ in the Senate send a clear message that both houses of Congress disapprove of SAB 121. The association also highlighted the growing awareness among the public, especially young voters, about the importance of cryptocurrency in modern finance. They argued that consumers should not be penalized for adopting new technologies and that excluding the highly regulated banking sector from digital assets is counterproductive.

Senator Cynthia Lummis celebrated the Senate’s decision, marking it as a triumph for financial innovation and a rebuke of what she described as the Biden administration’s and SEC Chairman Gary Gensler’s persecution of the crypto industry. She emphasized that this was the first instance of standalone crypto legislation being passed by both houses of Congress in this session.

Representative Mike Flood, the resolution’s sponsor, described the vote as a landmark result, citing the strong bipartisan support as evidence of widespread opposition to SAB 121. He urged President Biden to reconsider his veto threat, arguing that the resolution would steer America towards a more favorable digital financial future.

If President Biden vetoes the resolution, Congress has the option to override the veto with a two-thirds majority vote in both chambers. Achieving this majority would ensure that the resolution becomes law despite the President’s objections, a scenario that would significantly impact the SEC’s regulatory approach to cryptocurrencies.

The ongoing battle over SAB 121 highlights the broader struggle within the U.S. government to balance innovation in the cryptocurrency sector with the need for regulatory oversight to protect consumers and maintain financial stability. As the industry continues to evolve, the outcome of this legislative effort will have far-reaching implications for the future of cryptocurrency regulation in the United States.

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