The Battle Over Crypto Policy: House Passes Bill to Overturn SEC Guidance, Biden Threatens Veto
The Battle Over Crypto Policy: In a recent turn of events within the United States Congress, the House of Representatives has voted to pass a bill that challenges the Securities and Exchange Commission’s (SEC) guidance, which prohibits banks from owning cryptocurrency. However, this move has been met with opposition from President Joe Biden, who has threatened to veto the bill if it reaches his desk. This article will delve into the details surrounding the bill, the arguments from both sides, and the implications for the cryptocurrency industry.
On May 8, the House voted to pass a bipartisan bill known as H.J. Res 109, aiming to overturn the SEC’s Special Accounting Bulletin (SAB 121). This bulletin mandates banks to include their customers’ cryptocurrency assets on their balance sheets, unlike traditional assets such as securities. Republican Congressman Mike Flood, the bill’s sponsor, argued that SAB 121 unfairly burdens banks looking to custody cryptocurrency, as custodial assets are typically considered off-balance sheet.
The passage of H.J. Res 109 in the House was a bipartisan effort, with 21 Democrats joining unanimous Republican support, resulting in a 228-182 vote in favor of the bill. Despite this victory in the House, President Biden has expressed his intention to veto the bill. The White House released a statement on May 8, strongly opposing the bill’s passage, asserting that overturning SAB 121 would undermine the SEC’s efforts to protect investors and ensure the stability of the financial system.
Introduced by the SEC in March 2022, SAB 121 provides accounting guidelines for institutions engaging in cryptocurrency custody. However, it effectively prohibits banks from offering custodial services for cryptocurrencies, which has sparked criticism from lawmakers and industry participants. SEC Commissioner Hester Peirce has been vocal in her opposition to SAB 121, arguing that it disincentivizes regulated banks from entering the crypto custody market and treats crypto assets differently than traditional assets.
The House Financial Services Committee (HSFC) has supported the bill’s passage, emphasizing that overturning SAB 121 would remove obstacles preventing highly regulated financial institutions from serving as custodians of digital assets. HSFC Chairman Patrick McHenry criticized SAB 121 as an example of regulatory overreach under SEC Chairman Gary Gensler’s leadership.
The battle over crypto custody regulation highlights the broader debate surrounding the regulation of cryptocurrency markets and the role of government oversight. Advocates of the bill argue that allowing banks to custody crypto assets would facilitate greater institutional adoption and provide consumers with access to secure custodial services. On the other hand, opponents, including the Biden administration and the SEC, express concerns about investor protection, financial stability, and regulatory consistency.
The outcome of this legislative battle remains uncertain, as the bill moves to the Senate for consideration. The Senate’s response and potential negotiations between lawmakers and the Biden administration will determine the fate of H.J. Res 109 and its implications for the cryptocurrency industry. Regardless of the outcome, the debate over crypto custody regulation underscores the challenges of balancing innovation and investor protection in the rapidly evolving digital asset landscape.
