US Senate Passes Bill Overturning SEC Crypto Regulation
In a potentially game-changing moment for the crypto sector, the US Senate has passed H.J. Res 109, a bill seeking to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 121 on Thursday, May 16. The bill was passed with substantial bipartisan support, receiving a 60-38 vote in the Senate and earlier approval from the House.
Impact of SAB 121 on Crypto
SAB 121, implemented in 2022, mandated digital asset custodians to list digital assets as liabilities on their balance sheets, a requirement widely criticized within the crypto community. Critics argue that this regulation unfairly treats customer-owned digital assets as the custodian’s liabilities, thereby necessitating equivalent cash reserves to offset these “liabilities.”
Why Yesterday’s Vote Is A Game-Changer For Crypto
Avichal Garg, Co-Founder and General Partner at Electric Capital, expressed the industry’s frustration, stating, “If a bank custodies $1b of Bitcoin for customers, they have to hold $1b in cash to offset this ‘liability’ on their balance sheet. The assets are not the company’s. They are the customers’.” Garg also suggested that SAB 121 was designed to keep banks out of the crypto markets, which he sees as detrimental to consumer protection.
- The Senate’s decision represents a critical juncture for crypto regulation and political alignments concerning financial technology.
- The vote saw 21 Democrats break ranks under the influence of Senator Elizabeth Warren, suggesting a shift in market regulations.
- Senate Majority Leader Chuck Schumer’s vote in favor of repealing SAB 121 signals strong Congressional support for the cryptocurrency sector.
Industry Responses
- Matt Hougan, Chief Investment Officer at Bitwise, described the moment as transformative for the industry, potentially leading to new all-time highs.
- Perianne Boring, Founder and CEO of The Chamber of Digital Commerce, pointed out the potential influence of Senator Schumer in swaying the President’s decision.
- Jake Chervinsky, Chief Legal Officer at Variant Fund, commented on the bipartisan message favoring common sense against SEC overreach.
What Will President Biden Do?
The resolution now sits on President Biden’s desk, with the President expressing intentions to veto it, aligning with Senator Warren and SEC Chair Gary Gensler’s views on the importance of SEC’s guidelines for protecting investors in crypto markets.
- The crypto industry awaits President Biden’s decision, which could either maintain the status quo or significantly liberalize the regulatory environment.
- A veto could stifle institutional participation, while signing the bill could encourage more substantial engagement and market growth.
- The decision will determine the regulatory framework for digital asset custody and the administration’s stance on fintech innovation and regulation.
Hot Take: Decisive Moment for Crypto Sector
As the US Senate passes a bill overturning SEC crypto regulation, the decision now rests with President Biden, with implications for the crypto market’s future trajectory. The industry eagerly anticipates the President’s stance, which could either hinder or encourage further institutional engagement. With the potential for significant market growth, the outcome of this decision will define the regulatory landscape for digital asset custody and dictate the administration’s approach towards fintech innovation.
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