News
Cryptocurrencies Just Had a Breakthrough Moment, But Will Biden Veto?
In a potentially game-changing moment for the cryptocurrency industry, the U.S. Senate has passed HJ Res 109, a bill that seeks to overturn Staff Accounting Bulletin (SAB) No. 121 of the Securities and Exchange Commission (SEC) on Thursday, May 16. the bill passed with substantial bipartisan support, receiving a 60-38 vote in the Senate and prior approval by the House.
SAT 121, implemented in 2022, mandated digital asset custodians to list digital assets as liabilities on their balance sheets, a requirement widely criticized within the crypto community. Critics argue that this regulation unfairly treats customer-owned digital assets as custodian liabilities, thus requiring equivalent cash reserves to offset these “liabilities.”
Because yesterday’s vote is a turning point for cryptocurrencies
Avichal Garg, co-founder and general partner of Electric Capital, expressed industry frustration, stating: “If a bank holds $1 billion worth of Bitcoin for customers, it must hold $1 billion in cash to offset this ‘liability’ on its balance sheet. The assets don’t belong to the company. They do the customers ” Garg also suggested that SAB 121 was designed to keep banks out of cryptocurrency markets, which he considers harmful to consumer protection.
The Senate’s decision represents a critical moment not only for cryptocurrency regulation, but also for political alignments regarding financial technology. Notably, the vote saw 21 Democrats abandon their usual positions under the influence of Senator Elizabeth Warren, who has been a tough advocate of tough financial and technological regulations. This shift suggests a significant political realignment, potentially indicative of a broader centrist movement in the Democratic Party regarding market regulation.
Senate Majority Leader Chuck Schumer’s vote to repeal SAB 121 carries considerable weight, signaling strong congressional support for the cryptocurrency sector against the backdrop of President Biden’s veto threat.
Matt Hougan, Chief Investment Officer at Bitwise, described transformative moment for the industry: “This is a revolutionary moment for cryptocurrencies. It is one of the catalysts that will push cryptocurrencies to new all-time highs as the market digests the sea change that has occurred here.”
Further highlighting the political drama, Perianne Boring, founder and CEO of the Digital Chamber of Commerce, he underlined Senator Schumer’s potential influence in influencing the president’s decision: “If anyone can get POTUS to sign, it’s Schumer. We have a very real chance of taking this result over the finish line.”
Also Jake Chervinsky, legal director of Variant Fund commented on the implications of the vote, stating: “The Senate just delivered a deafening bipartisan message for common sense and against SEC overreach. It is impossible to overstate the importance of Majority Leader Schumer’s vote to repeal SAB 121 on the president Biden’s threatened veto.”
What will President Biden do?
The resolution is now on the desk of President Biden, who has expressed his intention to veto it, aligning himself with Senator Warren and SEC Chairman Gary Gensler’s view that SEC guidelines are crucial to protecting investors in volatile cryptocurrency markets. FOX Business’ Eleanor Terrett highlighted the president’s dilemma, noticing, “Biden now has 10 days to veto, sign or do nothing. Doing nothing would mean it would become law without a signature.”
The cryptocurrency industry remains tense awaiting the President’s decision. A veto would maintain the status quo, potentially stifling further institutional participation in the cryptocurrency market due to perceived regulatory risks. Conversely, the decision to sign or allow the bill to pass without a signature could significantly liberalize the regulatory environment, encouraging more substantive institutional commitment and possibly catalyzing a new phase of market growth and innovation.
As the deadline approaches, the decision will not only shape the regulatory framework for digital asset custody, but also signal the administration’s broader stance on innovation and regulation in the fintech sector.
At the time of writing, Bitcoin was trading at $65,565.
Featured image by Vox, chart by TradingView.com