House to Reconsider Bill Challenging SEC Crypto Directive

The U.S. House of Representatives is set to reconsider a bill aimed at overturning a contentious Securities and Exchange Commission (SEC) directive that critics claim hampers crypto companies from collaborating with banks. House Majority Leader Steve Scalise has scheduled the bill, previously vetoed by President Joe Biden in May, for reconsideration on July 9 or later.

Although the measure had previously passed both the House and Senate with bipartisan support, achieving the two-thirds majority needed to override Biden’s veto may be challenging.

Understanding SEC SAB 121

The SEC issued Staff Accounting Bulletin No. 121 (SAB 121) in March 2022. This guidance advises financial institutions that hold crypto on behalf of customers to include those assets on their balance sheets as if they owned them. Critics argue that this discourages investment banks and other traditional financial entities from providing crypto custody services on a large scale.

House Majority Whip Tom Emmer even called SAB 121 “illegal” and a “violation” of the SEC’s statutory mission, which is to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets.

The Impact on Investment

Despite the controversial nature of SAB 121, there was sufficient bipartisan support for the measure to pass through Congress. Lawmakers, investment banks, crypto investors, and even some crypto skeptics—typically divided on many issues—united in their desire to see SAB 121 repealed. They argued that the guidance forces banks to treat crypto assets differently from other types of assets, creating unnecessary complexity and uncertainty.

While the guidance is not a formal rule, the lack of clarity on how much banks would need to hold against crypto assets or how the SEC would enforce it has deterred several large firms from entering the crypto custody business.

Presidential Veto and Its Implications

When President Biden vetoed the bill, he emphasized that his administration would not support measures that jeopardize consumer and investor well-being. He noted that SAB 121 reflected considered technical views on the accounting obligations of firms safeguarding crypto assets.

Biden further stated that the Republican-led resolution to disapprove of SAB 121 would improperly limit the SEC’s ability to establish appropriate regulatory frameworks and address future issues.

He explained that overturning the guidance would undermine the SEC’s broader authority over accounting practices and stressed the necessity of appropriate guardrails to protect consumers and investors. The President expressed his administration’s readiness to collaborate with Congress to develop a comprehensive and balanced regulatory framework for digital assets, aiming to promote responsible development and maintain U.S. leadership in the global financial system.

What’s Next?

As the House prepares to revisit the bill, the crypto industry and its supporters are closely watching to see if the measure can gather enough support to override the presidential veto and repeal SAB 121. The outcome could significantly impact how banks handle crypto assets and the future of crypto custody services in the U.S.

For more updates on this and other cryptocurrency news, keep exploring Global Crypto News.