News
Biden administration will veto overturning controversial SEC crypto rules
The Biden administration said so May 8th who would veto the HJ resolution. 109, which seeks to overturn SEC Staff Accounting Bulletin 121 (SAB 121).
The administration said it “strongly opposes” the resolution because the change will interfere with the SEC’s efforts to protect cryptocurrency market investors and safeguard the financial system. The administration added that the SEC issued the bulletin because of demonstrated risks that have caused customer losses and reflects “the considered opinions of the SEC staff.”
The Biden administration said lawmakers’ invocation of the Congressional Review Act would inappropriately control the SEC’s ability to create guardrails and address cryptocurrency-related issues. Such limits would introduce financial instability and market uncertainty.
The notice concluded:
“If HJ Res. 109 were presented to the President, he would veto it.”
House scheduled to vote
The US House of Representatives will vote on the resolution on May 8.
Chairman of the House Financial Services Committee Patrick McHenry statements released supporting the resolution, calling SAB 121 “one of the most egregious examples” of excessive SEC intervention under the current president, Gary Gensler.
He said the agency avoided public comment and the rulemaking process as required by the Administrative Procedure Act (APA) by labeling requirements for staff orientation.
McHenry called SAB 121 “cost prohibitive” for banks aiming to provide custody for customers’ cryptocurrencies and warned that reducing bank participation could leave users’ assets vulnerable.
Rep. Tom Emmer has also supported overturning SAB 121. Congressman Mike Flood initially sponsored the resolution.
Industry implications
SAB 121 requires financial institutions and companies that safeguard customers’ cryptocurrencies to keep the assets on their balance sheet.
SAT 121 also has received a rejection 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 found 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 records and traditional assets on authorized registers.
Despite its dissatisfaction with the current rules, the ABA asked the SEC to amend SAB 121 rather than completely overturn it.