The Biden administration said on May 8 that it would veto HJ Res. 109, which intends to overturn the SEC’s Staff Accounting Bulletin 121 (SAB 121).
The government said it “strongly opposes” the resolution because the change will hamper the SEC’s efforts to protect investors in the crypto market and protect the financial system. The administration added that the SEC released the bulletin because of demonstrated risks that have caused customer losses and that it reflects the “considered views of the SEC staff.”
The Biden administration said lawmakers’ invocation of the Congressional Review Act would improperly control the SEC’s ability to create guardrails and address crypto issues. Such restrictions would bring financial instability and market uncertainty.
The notice concluded:
“If the President HJ Res. 109, he would veto it.”
House scheduled to vote
The U.S. House of Representatives will vote on the resolution on May 8.
House Financial Services Committee Chairman Patrick McHenry issued statements supporting the resolution, calling SAB 121 “one of the most glaring examples” of the SEC’s overreach under its current chairman, Gary Gensler.
He alleged that the agency avoided public comment and the rulemaking process required by the Administrative Procedure Act (APA) by labeling the employee guidance requirements.
McHenry called SAB 121 “unaffordable” for banks looking to provide custody of customers’ cryptocurrencies and warned that reducing banks’ participation could leave users’ assets vulnerable.
Representative Tom Emmer has also supported the overturning of SAB 121. Congressman Mike Flood initially sponsored the resolution.
Consequences for the sector
SAB 121 requires financial institutions and companies that protect customers’ cryptocurrencies to keep the assets on their balance sheets.
SAB 121 has also received resistance from the banking sector itself. The American Bankers Association (ABA) said in February that the policy has created challenges since its introduction in 2022.
ABA noted two major issues: SAB 121 makes it “practically impossible” for banks to act as custodians for spot Bitcoin ETFs due to reserve and capital requirements, and the bulletin does not distinguish between cryptos on public ledgers and traditional assets on approved ledgers .
Despite its dissatisfaction with the current rules, the ABA has asked the SEC to amend SAB 121 rather than completely overturn it.