The US House of Representatives couldn’t get enough votes to override President Biden’s veto and end the the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121).
The SEC’s controversial rule remains in effect as Congress’ effort to bring together the supermajority required to override the President’s veto was unsuccessful. Whatever happens now, the crypto space is likely to change after the US elections in the fall.
On Thursday, House members voted on H.J.Res. 109, a bill that sought to nullify the SEC SAB 121. The voting ended with 228 House members voting for H.J.Res. 109 while 184 House members voted against the resolution. The rest abstained from voting.
No Rest From This Administration
The outcome represented majority support for overturning SAB 121; however, fell short of the two-thirds majority needed to override President Biden’s earlier veto of the resolution.
This means that the SAB 121 remains in effect. The SEC’s accounting guidance for crypto-asset custody will continue to be enforced as outlined in SAB 121.
According to Fox Business journalist Eleanor Terrett, most Democrats voted to get rid of SAB 121, while most Republicans opposed it. A few members of each party switched sides since an earlier vote.
Three House Democrats, including Dean Phillips, Mikie Sherrill, and Marc Veasey, changed their votes from “yes” to “no”, opposing the effort to end SAB 121, Terrett noted. On the other hand, four Democrats, including Jonathan Jackson, Ro Khanna, Tom Suozzi, and Shri Thanedar, shifted their votes from “no” to “yes.”
Republican Drew Ferguson also switched sides, supporting the effort to end SAB 121.
Ongoing Debate
Representative Mike Flood, who introduced the H.J.Res. 109 in collaboration with Representative Wiley Nickel, said he “will continue to pursue other pathways to end SAB 121.” He had led the Congressional effort to overturn the SEC’s bulletin.
Flood and other advocates who seek to end SAB 121 believe the SEC rule effectively prevents banks from providing custodial services to digital assets investors by requiring them to keep those assets on their balance sheet.
Industry groups like the American Bankers Association and Blockchain Association had urged Congress to overturn SAB 121. The entities arguing it hinders banks’ ability to offer digital asset custody services. However, the Biden administration and SEC leadership maintained that SAB 121 is necessary to address the unique risks of crypto-asset custody.
The result caused some disappointment among the supporters.
Kristin Smith, CEO of the Blockchain Association, said there is, “bipartisan agreement in both chambers of Congress that SAB 121 is nothing more than a punitive, anti-digital asset tool deployed by the SEC, and there’s clear consensus that the SEC’s view on digital assets is flawed.”
Cody Carbone, chief policy officer for the Digital Chamber that represents the crypto industry in Washington, said
“The president ignored bipartisan support in Congress to avoid embarrassment for his rogue SEC chair.”
According to a recent report from Bloomberg, the SEC is allowing some banks and brokerages to avoid reporting customer crypto holdings on their balance sheets, but with conditions: Companies must prove they can offset risks associated with these cryptocurrency assets.
Representative Maxine Waters said the SEC has been negotiating with the banking industry to potentially modify SAB 121.
Despite the potential improvements and benefits, banks and financial institutions still prefer the full removal of the SAB 121 through legislation. With the current administration, any progress is difficult.
On Wednesday, industry figures met with a White House representative in a roundtable hosted by Representative Ro Khanna. Some notable names are billionaire entrepreneur Mark Cuban, Coinbase’s chief legal officer Paul Grewal, and Ripple CEO Brad Garlinghouse.
Coinbase’s Grewal said the industry called for a “strong White House signal that it’s willing to catch up to Republicans in supporting crypto.”
