The ongoing debate surrounding the regulation of cryptocurrencies in the United States has reached a new milestone as the House of Representatives voted to approve a resolution rejecting the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121).
The controversial accounting policy requires banks holding customers’ digital tokens to include them on their own balance sheets, potentially leading to substantial capital expenses.
TLDR
- The U.S. House of Representatives voted to approve a resolution rejecting the SEC’s Staff Accounting Bulletin No. 121 (SAB 121) on crypto accounting guidance.
- SAB 121 requires banks holding customers’ digital tokens to do so on their own balance sheets, potentially incurring substantial capital expenses.
- President Joe Biden has threatened to veto the resolution if it reaches his desk, arguing that SAB 121 protects consumers and financial stability.
- Critics argue that SAB 121 deters banks from handling crypto customers and represents regulatory overreach by the SEC and Chair Gary Gensler.
- The resolution’s fate now lies with the Senate, and the outcome will have significant implications for the cryptocurrency industry and the balance between innovation and investor protection.
Supporters of the resolution, led by Rep. Mike Flood (R-Neb.), argue that SAB 121 unfairly burdens banks seeking to custody cryptocurrency and represents an overreach of the SEC’s regulatory powers.
They contend that the policy guidance deters banks from handling crypto customers and treats digital assets differently than traditional assets such as securities.
The House vote saw bipartisan support, with 21 Democrats joining unanimous Republican backing, resulting in a 228-182 vote in favor of the resolution.
However, President Joe Biden has expressed his strong opposition to the measure, threatening to veto it if it reaches his desk.
The White House maintains that overturning SAB 121 would undermine the SEC’s efforts to protect investors and ensure the stability of the financial system amidst the risks associated with crypto assets.
Critics of SAB 121, including SEC Commissioner Hester Peirce, argue that the policy disincentivizes regulated banks from entering the crypto custody market, potentially hindering the adoption of digital assets by institutional investors.
They emphasize the importance of allowing banks to custody crypto assets to facilitate secure custodial services for consumers and promote greater institutional participation in the cryptocurrency industry.
On the other hand, proponents of SAB 121, including the Biden administration and SEC Chair Gary Gensler, express concerns about investor protection, financial stability, and regulatory consistency.
They argue that the policy is necessary to address the technological, legal, and regulatory risks associated with cryptocurrencies and to prevent substantial losses to consumers.
As the resolution moves to the Senate for consideration, the fate of SAB 121 and the broader implications for the cryptocurrency industry remain uncertain.
The Senate’s response and potential negotiations between lawmakers and the Biden administration will determine whether the resolution ultimately succeeds in overturning the SEC’s accounting policy.
