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US Senate Votes to Eliminate SEC Crypto Accounting Policy, Testing Biden’s Veto Threat
The U.S. Senate on Thursday joined the House of Representatives in attempting to clear the controversial Securities and Exchange Commission (SEC) crypto policy known as Staff Accounting Bulletin No. 121, although President Joe Biden has vowed to veto the resolution. The Senate voted 60-38 on the attempt to overturn the policy, commonly referred to as SAB 121, although the cryptocurrency industry may not breathe a sigh of relief over the initiative’s banking constraints, because Biden said that allowing the rule to be removed in this way would disrupt “the work to protect investors in cryptocurrency markets and safeguard the broader financial system.”
A dozen Democrats and a majority of Republicans voted in favor of the resolution, easily exceeding the simple majority votes needed to pass it. However, the resolution did not receive enough votes to make it veto-proof.
Senate Majority Leader Chuck Schumer (D-N.Y.) also stood up to his party’s leader in opposing the SEC’s crypto effort, along with other Democratic Party leaders.
Sen. Cynthia Lummis (R-Wyo.), who pushed for the resolution in the Senate, said the bulletin is “a disaster” that doesn’t protect consumers.
“This is a victory for financial innovation and a clear rebuke to the way the Biden administration and President Gary Gensler have treated cryptocurrencies and marks the first time both houses of Congress have passed standalone cryptocurrency legislation” , he said in a statement.
Issued by the agency in 2022, SAB 121 argued that a company holding a client’s cryptocurrencies should record them on its balance sheet, which could have major capital implications for banks working with crypto clients. Republican lawmakers have criticized the SEC for instituting a policy without going through the necessary regulatory process The Government Accountability Office agreedbelieving the regulator erred in the way it handled what should have been a rule rather than guidance for staff.
“SAB 121 is non-binding staff guidance that, if followed, improves important disclosures to investors in companies that safeguard crypto assets for others,” an SEC spokesperson said in a statement after the vote. “Many times we have seen cryptocurrency companies fail and we have seen their customers line up in bankruptcy court in hopes of getting what they thought was legally theirs.”
For years, Republican lawmakers have battled with federal financial agencies over the role of “guidance” documents, arguing that regulators are exercising their authorities and that regulated industries believe they cannot afford to ignore guidance, whether “non-binding” or “non-binding.” ”. or not.
House and Senate lawmakers pursued SAB 121 under the Congressional Review Act, which allows Congress to overturn federal rules. A number of Democrats – including 21 in the House – joined the largely Republican effort, defying White House warnings.
Rep. Kyle Flood (R-Neb.), one of the architects of the resolution, called the vote a “landmark achievement,” noting bipartisan support.
“It is clear that there is overwhelming opposition to SAB 121, and I urge President Joe Biden to reconsider his previous statement of intent to veto the resolution. The President should sign my resolution to ensure that the SEC reverses course and put America on a path to growth our digital financial future,” he said. Because they tried to kill the policy with the Congressional Review Act, a successful reversal would mean – by law – that the SEC would not be able to pursue similar policies in the future, which the White House statement suggests “could also limit inappropriately the power of the SEC.” ability to ensure adequate protections and address future issues related to crypto-assets, including financial stability.”
Rep. Wiley Nickel (D-N.C.), who also co-sponsored the House resolution, said the House “should never have resorted” to the Congressional Review Act and reiterated his call for the SEC to withdraw the bulletin before it is sent to Congress. Biden’s desk.
“Today’s Senate vote to repeal SAB 121 sends a clear bipartisan message: Congress will not stand by while Gary Gensler and the SEC deliberately circumvent the statutory rulemaking process and overstep their regulatory authority,” he said.
Aside from an earlier cryptocurrency tax provision that made it into an infrastructure bill despite industry resistance, this marks the first time Congress has moved on an issue centered on the cryptocurrency industry, and it was somewhat intended to help the sector.
SEC spokespeople did not immediately respond to a request for comment.
UPDATE (May 16, 2024, 5:20pm UTC): Adds statements from the legislator.
UPDATE (May 16, 2024, 6:21pm UTC): Adds SEC comment.