US Senate abandons SEC crypto policy, while Biden voices his opinion
Lawmakers, industry experts, and banking executives are raising concerns over the SEC’s policy on crypto custody and accounting, arguing that it is detrimental to US investors and hinders innovation. However, President Joe Biden holds a different opinion.
In a recent development, Joe Biden has vetoed a crucial ruling known as SAB 121, setting the stage for a fierce battle in Washington. The ruling in question is the Staff Accounting Bulletin (SAB) 121, which has been subject to significant controversy.
SAB 121 requires public companies to disclose and account for the risks and obligations associated with safeguarding customers’ crypto assets. This policy has sparked a heated debate due to its potential to complicate financial reporting and increase operational burdens.
Implemented in 2022, these rules have faced strong opposition from the crypto industry and banks, who argue that they have hindered the provision of digital asset services. In response, the US Senate voted on May 16 to repeal the SEC guidelines, but opponents of SAB 121 still face further challenges.
The Senate ruling requires presidential approval, and President Joe Biden has made it clear that he is willing to veto the resolution aimed at scrapping SAB 121 altogether. The White House has expressed its support for SAB 121, stating that the administration stands behind the policy.
Some Democratic lawmakers have been urging SEC chair Gary Gensler to voluntarily withdraw SAB 121 instead of waiting for Congress to take action. Congressman Wiley Nickel, representing North Carolina’s 13th District, is confident that Joint Resolution 109 will pass the Senate.
Nickel argues that eliminating SAB 121 would better protect investors and ensure the US remains competitive on a global scale. He believes that banks with a successful track record in fiat custody services should be able to extend their offerings to include crypto. Critics of SAB 121 argue that the regulation has been ineffective, as evidenced by incidents involving crypto projects such as Voyager and Celsius failing to protect customer assets.
In a letter to Gensler, Congressman Nickel described SAB 121 as a “prohibitively expensive regulatory burden” that forces US consumers to rely on riskier offshore custody solutions. He criticized the SEC’s approach to digital assets as misguided and raised concerns about how SAB 121 was enforced, accusing the commission of breaching the rulemaking process.
Austin Campbell, the founder of Zero Knowledge Consulting, referred to SAB 121 as “insanity” and criticized its unilateral adoption without consultation. He argued that the policy damages the rights of crypto holders in bankruptcy situations. Campbell also highlighted major financial institutions’ opposition to SAB 121, as it restricts their access to the growing demand for exchange-traded funds based on Bitcoin’s spot price.
Charles Hoskinson, the founder of Cardano, has also voiced strong criticism of Biden’s stance on digital assets, claiming that his administration is attempting to destroy the US crypto sector. Hoskinson argued that it is inappropriate for the SEC to regulate crypto using outdated legislation and that the heavy-handed regulatory approach has prompted legitimate exchanges and trading platforms to relocate and benefit rival economies through job creation and tax revenues.
With a looming veto from President Biden, this saga is far from concluded. It will be intriguing to observe the reactions of lawmakers on Capitol Hill and industry leaders in both traditional finance and the crypto space.
