Failure to Override the SEC Rule: What’s Next for Crypto?
The US House of Representatives failed to gather enough votes to override President Biden’s veto against ending the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121). Despite majority support in Congress, the two-thirds majority required for the override was not achieved. This outcome has significant implications for the future of the cryptocurrency industry, especially in light of the upcoming US elections.
Impact of the Administration’s Decision
- Although most Democrats supported overturning SAB 121, the veto remains in effect.
- The SEC’s accounting guidance for crypto-asset custody will continue to be enforced as outlined in SAB 121.
- The divide between Democrats and Republicans on this issue is evident, with some members switching sides during the vote.
No Rest From This Administration
The efforts to end SAB 121 were met with resistance from the Biden administration, leading to the SEC rule remaining in place. While the majority of House members supported nullifying SAB 121, it was not enough to override the President’s veto. The implications of this decision are far-reaching for the cryptocurrency industry and its stakeholders.
Ongoing Debate and Industry Reactions
- Representative Mike Flood, along with other advocates, will explore alternative pathways to end SAB 121 despite the recent setback.
- Industry groups like the American Bankers Association and Blockchain Association have voiced their concerns over how SAB 121 hinders banks from offering digital asset custody services.
- The Biden administration and SEC leadership defend SAB 121, citing the unique risks associated with crypto-asset custody.
Disappointment Among Supporters
The failure to override SAB 121 has disappointed many in the industry who believed that the SEC rule was inhibiting progress and innovation. Despite bipartisan support in Congress, the veto from President Biden reflects a challenging landscape for crypto regulation.
Industry Perspective and White House Engagement
- Industry leaders, including Mark Cuban, Paul Grewal, and Brad Garlinghouse, met with a White House representative to discuss the future of crypto regulation.
- Calls for a “strong White House signal” in support of crypto have intensified, as stakeholders seek clarity and alignment with regulatory goals.
- While the SEC has shown some flexibility in allowing banks to deviate from SAB 121 under certain conditions, the industry still advocates for complete removal of the rule through legislation.
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