Senate Repeals SEC Crypto Rule

The US Senate voted 60-38 to pass H.J. Res 109, reversing the SEC’s controversial Staff Accounting Bulletin No. 121 (SAB 121). This bipartisan decision follows the House of Representatives' approval and challenges the SEC's crypto policy. SAB 121, introduced in March 2022, requires financial institutions to include customers’ digital assets on their balance sheets. Critics argue this creates significant operational and financial burdens for firms handling cryptocurrencies and risks customer assets during bankruptcy.

Senator Cynthia Lummis led the resolution’s passage, emphasizing the dangers of SAB 121. She explained that placing customers’ assets on institutional balance sheets could jeopardize them during bankruptcies. “SAB 121 puts consumers at risk by requiring institutions to list consumers’ assets on their balance sheet,” Lummis said. “Creditors can claim these assets in bankruptcy, freezing them for months or years. In some cases, consumers lose their assets entirely.”

Lummis also supported self-hosted wallets for digital assets, aligning with her challenge to the Department of Justice’s stance on non-custodial crypto services. After the vote, Lummis praised the Senate’s decision on social media, calling it a win for financial innovation and a rebuke to the Biden administration’s crypto regulation approach. “This marks the first standalone crypto legislation passed by Congress,” she wrote on X (formerly Twitter).

The crypto community celebrated the decision. Michael Saylor, founder of MicroStrategy and a Bitcoin advocate, expressed his excitement on X, saying, “Wall Street, the House, and now the Senate want Bitcoin.” Despite the resolution’s success in Congress, it did not secure enough votes to be veto-proof. President Joe Biden has vowed to veto the resolution, arguing that overturning SAB 121 would weaken the SEC’s ability to protect investors and the financial system from crypto-related risks.

Biden’s administration has recently intensified its regulatory stance against the crypto industry. In response, industry leaders are rallying support for pro-crypto political candidates. Coinbase launched a new political action committee (PAC) named “Stand With Crypto” to support crypto-friendly candidates. Prominent figures like Mark Cuban and Hayden Adams have warned that Biden’s current stance could influence upcoming elections.

The debate over SAB 121 highlights the broader conflict between regulatory bodies and the crypto industry. While the SEC aims to protect investors, crypto advocates argue that excessive regulation stifles innovation and exposes consumers to new risks.

As the resolution moves to President Biden’s desk, the future of SAB 121 is uncertain. If vetoed, the debate over how best to regulate the crypto industry will likely intensify. The Senate’s vote marks a critical point in the ongoing battle over crypto regulation, reflecting the growing influence of the crypto community in shaping policy. Whether the resolution becomes law or faces a presidential veto, the outcome will have significant implications for cryptocurrency regulation in the US.