Senate Votes to Scrap SEC Crypto Policy, Biden Vows to Veto Joint Resolution

A Bitcion mock-up on Jan. 12; 2022. John Fredricks/The Epoch Times

The Senate voted to nix a Securities and Exchange Commission (SEC) accounting policy related to cryptocurrency on May 16, setting up a possible showdown with President Joe Biden, who has promised to veto the joint resolution.

Using the Congressional Review Act, lawmakers in the upper chamber voted 60–38 to scrap Staff Accounting Bulletin 121.

Introduced in 2022, this measure requires banks and other digital asset custodians to treat digital assets as liabilities and maintain them at fair value on their balance sheets. For example, if a financial institution holds $1 million in Bitcoin for clients, it must carry $1 million in cash to offset the liability on its balance sheet.

Eleven Democrats, including Senate Majority Leader Chuck Schumer (D-N.Y.), ignored the president’s wishes, effectively undoing SEC guidance on crypto accounting.

The joint resolution passed the House in a bipartisan 228–182 vote, with 21 Democrats joining Republicans to end the SEC rule.

It will now head to President Biden’s desk. The White House has signaled that the resolution will be vetoed, asserting that SAB 121 protects crypto-asset markets and safeguards the broader financial system from potential crises.

“Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty,” the White House said in a statement earlier this month.

However, members on both sides of the aisle have expressed consternation surrounding the policy.

In a letter to SEC Chair Gary Gensler, Rep. Wiley Nickel (D-N.C.) accused the federal agency of turning cryptocurrency “into a political football” and forcing President Biden “to unnecessarily choose sides on an issue that matters to many Americans.”

He urged Mr. Gensler to withdraw from the matter.

“Crypto is in the middle of a policy tug-of-war between the Administrative State and the American people,” GOP Majority Whip Tom Emmer (R-Minn.) said on social media platform X, formerly known as Twitter.

Overturning SAB 121 “is a win for financial innovation” and a rejection of how the current administration has “persecuted crypto,” Sen. Cynthia Lummis (R-Wy.) said on X.

Industry Reaction

Proponents argue that the rule would support SEC staff’s recommendations for addressing regulatory, legal, and technological risks that negatively affect consumers.

Critics contend that the proposal disincentivizes companies and major custodians from holding cryptocurrency assets for clients, with the purpose of keeping banks out of the crypto markets.

The congressional action received applause from the American Bankers Association, which called the vote “a clear bipartisan rebuke of the SEC’s decision to depart from its longstanding accounting treatment for custodied assets in a way that threatens banks’ ability to provide consumers with safe and sound digital asset services.”

“Without bank custodians for digital assets, consumers are left only with unsupervised, poorly regulated options to safeguard these assets,” Rob Nichols, president and CEO of the industry trade association, said in a statement. “We urge President Biden to move quickly to sign this resolution into law to help protect American consumers.”

Crypto advocates described it as a win for Bitcoin.

“Wall Street wants Bitcoin, the House of Representatives wants Bitcoin, and now the Senate wants Bitcoin,” Michael Saylor, founder and chairman of MicroStrategy, said on X.

Blockchain Association, a crypto advocacy organization, wrote on X that the “stunning” Senate vote sent the message that both houses of Congress “clearly disapprove of this rule.”

“The threat of a presidential veto denies the fact that there is a growing awareness among the voting public, particularly young people, that crypto is something our elected officials should care about,” the group stated.

Gary Gensler, the SEC, Crypto

Mr. Gensler has been vocal in his opposition to cryptocurrency.

In June 2023, the SEC chief argued that the U.S. economy does not need more digital currency, explaining that the markets already have digital currency, referring to the dollar, euro, and yen.

“They’re all digital right now,” he said. “We already have digital investments.”

Mr. Gensler also likened the crypto industry to the “fraudsters, scam artists, and Ponzi schemes” of the 1920s before federal securities laws were implemented in the 1930s.

“With wide-ranging noncompliance, frankly, it’s not surprising that we’ve seen many problems in these markets,” Mr. Gensler said at the Piper Sandler Global Exchange and FinTech Conference in New York City in June 2023.

“We’ve seen this story before. It’s reminiscent of what we had in the 1920s before the federal securities laws were put in place: Hucksters, fraudsters, scam artists, Ponzi schemes. The public left in line at the bankruptcy court.”

Appearing before the Senate Appropriations Committee in July 2023, Mr. Gensler requested additional budget funding to clamp down on the “Wild West of the crypto markets” by using “new instruments, experience, and assets.”

The SEC has also racked up several legal wins in its crusade against crypto this year.

However, while critics accuse the SEC of unfairly targeting crypto, the SEC’s enforcement director, Gurbir Grewal, said last month that “the federal securities laws apply equally to everyone.”

“You don’t get your own rules,” he said.