The U.S. House of Representatives is set to reconsider a bill that aims to overturn a controversial Securities and Exchange Commission (SEC) directive that critics say would prevent cryptocurrency companies from working with banks.
House Majority Leader Steve Scalise has scheduled a reconsideration of the bill, which President Joe Biden vetoed in May, for July 9 or later.
The bill has already passed the House and Senate with bipartisan support, but it could be difficult to get the two-thirds majority needed to overturn Biden’s veto.
In March 2022, the SEC issued Staff Accounting Bulletin No. 121 (SAB 121), which recommended that financial institutions that hold cryptocurrencies on behalf of their customers include them on their balance sheets as if they owned the cryptocurrencies themselves.
The guidelines have been criticized for discouraging investment banks and other traditional financial institutions from offering cryptocurrency custody services on a large scale.
House Majority Leader Tom Emmer has denounced SAB 121 as “illegal” and a “violation” of the SEC’s statutory mission.
The Senate voted to repeal these accounting guidelines, which many critics argued were unnecessary and discouraged investment.
Despite its controversy, SAB 121 was able to pass Congress with sufficient bipartisan support.
Lawmakers, investment banks, cryptocurrency investors, and even some crypto skeptics (who are generally divided on many issues) are united in their desire to see SAB 121 repealed. They argue that the guidance forces banks to treat crypto assets differently from other types of assets, creating unnecessary complexity and uncertainty.
While the guidelines are not formal rules, the lack of clarity on how much money banks should hold in crypto assets or how the SEC will enforce this has prevented several large companies from entering the crypto custody business.
When President Biden vetoed the bill, he posted a letter on the White House website explaining his decision, emphasizing that his administration would not support measures that threaten the well-being of consumers and investors.
He also noted that SAB 121 reflects a technical view on the accounting obligations of companies that hold crypto assets.
Biden also said the Republican-led resolution opposing SAB 121 would unfairly limit the SEC’s ability to establish an appropriate regulatory framework and address future issues.
The US president explained that reversing the guidance would undermine the SEC’s broader authority over accounting practices. He also argued that adequate safeguards are needed to protect consumers and investors, which are essential to taking advantage of the potential benefits of cryptocurrency innovation.
He also said the U.S. government stands ready to work with Congress to develop a comprehensive and balanced regulatory framework for digital assets that builds on existing authorities to promote responsible development and maintain U.S. leadership in the global financial system.
As the House prepares to revisit the bill, the cryptocurrency industry and its supporters will be watching closely to see if the measure can gain enough support to override the President’s veto and repeal SAB 121. The outcome could have significant implications for how banks handle crypto assets and the future of crypto custody services in the United States.