The U.S. House of Representatives is gearing up to reconsider a bill that aims to reverse a controversial directive from the Securities and Exchange Commission (SEC) that critics argue is hindering crypto companies from working with banks. House Majority Leader Steve Scalise has scheduled the bill, which was previously vetoed by President Joe Biden in May, for reconsideration on July 9 or later.
The SEC issued Staff Accounting Bulletin No. 121 (SAB 121) in March 2022, instructing financial institutions that hold crypto assets for customers to include those assets on their balance sheets as if they owned them. This guidance received backlash for discouraging investment banks and traditional financial entities from offering crypto custody services on a large scale.
The Senate had previously voted on the resolution to repeal this accounting guidance, which many critics deemed unnecessary and a deterrent to investment. Despite the controversial nature of SAB 121, the measure had enough bipartisan support to pass through Congress. Various stakeholders, including lawmakers, investment banks, crypto investors, and skeptics, united in their desire to see SAB 121 overturned due to concerns about complexity and uncertainty in the treatment of crypto assets by banks.
When President Biden vetoed the bill, he cited concerns for consumer and investor well-being as the primary reason for his decision. Biden highlighted that SAB 121 was based on careful technical considerations regarding the accounting obligations of firms safeguarding crypto assets. He also argued that repealing the guidance would restrict the SEC’s ability to establish appropriate regulatory frameworks and handle future issues related to crypto assets.
Biden emphasized the importance of maintaining appropriate guardrails to protect consumers and investors while fostering the benefits of crypto innovation. He expressed willingness to work with Congress to develop a comprehensive regulatory framework for digital assets that builds on existing authorities and upholds U.S. leadership in the global financial system.
As the House gets ready to revisit the bill, the crypto industry and its supporters are eagerly anticipating the outcome. The decision on whether to override the presidential veto and repeal SAB 121 could have a significant impact on how banks engage with crypto assets and the future of crypto custody services in the United States. Stakeholders will be closely following the proceedings to see if there is enough support to push the bill through and address the challenges posed by the SEC’s accounting guidance.
