The US Senate joined the House of Representatives on Thursday in trying to erase the Securities and Exchange Commission’s (SEC) controversial crypto policy, known as Staff Accounting Bulletin No. 121, even though President Joe Biden has vowed to veto it. the resolution. The Senate voted 60-38 on the effort to overturn the policy, commonly referred to as SAB 121, although the crypto industry may not breathe a sigh of relief over the initiative’s banking restrictions because Biden said that allowing the rule to be removed in this way would hinder “work to protect investors in crypto markets and to safeguard the broader financial system.”

A dozen Democrats voted alongside a majority of Republicans in favor of the resolution, easily giving it more than the simple majority of votes needed to pass. However, the resolution did not receive enough votes to make it veto-proof.

Even Senate Majority Leader Chuck Schumer (DN.Y.) bucked his party’s leader by opposing the SEC’s crypto effort, alongside other Democratic Party leaders.

Sen. Cynthia Lummis (R-Wyo.), who pushed for the resolution in the Senate, said the bulletin was “a disaster” that did not protect consumers.

“This is a victory for financial innovation and a clear rebuke to the way the Biden administration and President Gary Gensler have handled crypto assets and marks the first time both chambers of Congress have passed independent crypto legislation,” she said in a statement. communicated.

Issued by the agency in 2022, SAB 121 held that a company holding a client’s cryptocurrencies must record them on its own balance sheet – which could have major capital implications for banks working with crypto clients. Republican lawmakers criticized the SEC for instituting a policy without going through the necessary rulemaking process, and the Government Accountability Office agreedconcluding that the regulator erred in the way it handled what should have been a rule rather than staff guidance.

“SAB 121 is non-binding staff guidance that, if followed, increases important disclosure for investors in companies that secure crypto assets for third parties,” an SEC spokesperson said in a statement after the vote. “Time and again, we’ve seen crypto companies go bankrupt and seen their customers line up in bankruptcy court hoping to get what they thought was legally theirs.”

For years, Republican lawmakers have fought with federal financial agencies over the role of “guidance” documents, arguing that regulators broaden their authorities and that regulated industries feel they cannot ignore guidance, whether “non-binding.” or not.

House and Senate lawmakers went after SAB 121 under the Congressional Review Act, which allows Congress to override federal rules. Several Democrats — including 21 in the House — joined the mostly Republican effort, defying warnings from the White House.

Rep. Mike Flood (R-Neb.), one of the resolution’s architects, called the vote a “landmark result,” noting the 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 must sign my resolution to ensure that the SEC reverses course and puts America on the path to growing our digital financial future,” he said. As they sought to eliminate the policy with the Congressional Review Act, a welcome reversal Successful would mean – by law – that the SEC would not be able to pursue similar policies in the future, which the White House statement suggested “could also inappropriately restrict the SEC’s ability to ensure appropriate protections and resolve future issues related to the SEC.” cryptoassets, 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 going for Biden’s Desk.

“Today’s vote in the Senate 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.

In addition to a previous crypto tax provision that was turned into an infrastructure bill despite industry resistance, this marks the first time that Congress has addressed an issue that focuses on the crypto industry, and was in some ways intended to help the sector.

SEC spokespeople did not immediately return a request for comment.

UPDATE (May 16, 2024, 5:20 pm UTC): Adds statements from the legislator.

UPDATE (May 16, 2024, 6:21 pm UTC): Adds SEC comment.

UPDATE (May 16, 2024, 11:40 pm UTC): Corrects Rep. Flood’s name.

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