US House of Representatives prepares to vote on erasing SEC crypto policy as President Biden vows to veto

The US House of Representatives is preparing to vote on it resolution on Wednesday to reject the SEC’s cryptocurrency accounting guidance that the industry said prevents banks from doing business with cryptocurrency clients, but President Joe Biden has already promised he will veto those efforts if they reach his desk.

SEC Staff Accounting Bulletin 121 — also known as SAB 121 — has been the subject of criticism from digital asset companies and Republican lawmakers since its arrival. The aim of the circular was to clarify the accounting treatment of crypto assets, directing the bank that holds a customer’s digital tokens to do so on its balance sheet, potentially incurring huge capital expenditures. But it has since been found in a government audit that the policy guidance was poorly handled, even though the agency and its head, Gary Gensler, defended it.

“Gary Gensler, in his jihad against digital assets, has used what were supposedly standard employee accounting guidance to prevent large, publicly traded banks from seizing digital assets,” said Nebraska Republican Rep. Mike Flood. The official sponsor of the effort, said in an interview Wednesday with CoinDesk. Flood noted that the SEC did not consult with banking regulators on the matter, arguing that Gensler “has no business in the banking world.”

The White House considers this policy worth defending using the veto, according to a statement by Biden.

“SAB 121 was issued in response to clear technological, legal, and regulatory risks that have caused significant consumer losses,” Biden said He said in a statement on WednesdaySaying he “strongly opposes” disrupting the SEC’s action on the matter.

Flood said he expects the House to vote late today to repeal the SEC policy.

“It made a joke of rulemaking and ignored other regulators,” said Rep. Patrick McHenry, chairman of the House Financial Services Committee. Speech on the floor of the House of Representatives on Wednesday, calling SAB 121 “a massive departure from the extent to which highly regulated banks have traditionally been required to transact assets on behalf of their clients.”

But one key House Democrat believes the resolution goes further.

“This bill takes a sledgehammer to fix a problem that might just take a scalpel, and it does so because my colleagues on the other side of the aisle are not only interested in doing the bidding of special interest groups, they are also interested in attacking the law,” said Rep. Maxine Waters (D-Calif.). Ranking Democrat on McHenry Committee: “Undermining the SEC in every way possible.”

SAB 121 was originally introduced as staff guidance, but a subsequent Government Accountability Office (GAO) review determined that the agency should have treated it as a rule, with full public comment and submission to Congress.

Rep. Flood introduced the resolution to formally reject the regulator’s guidance along with two Democrats, and Sen. Cynthia Lummis (R-Wyo.) has been pushing for an identical resolution in the Senate, which would be needed before the joint resolution can take effect. . To Biden’s office.

When the agency base It was reversed by the Congressional Review ActNot only is it erased, but anything similar is forever blocked from future execution. Waters argued that SAB 121 — aside from the controversial custody component — also provided guidance on necessary cryptocurrency disclosures that would be threatened if Congress repealed the policy, and Biden echoed concerns about which policies would be blocked.

“By enacting the Congressional Review Act, it could also inappropriately restrict the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto assets including financial stability,” Biden said. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto assets would lead to significant financial instability and market uncertainty.”

Flood called it “disappointing” that the president would approve of the improper use of the circular to do the work of full federal rulemaking. He and his allies, he said, “will be looking for every vehicle between now and the end of the year that will go to the president’s office and add this language there.”