American Crypto in Congress

Wall Street banks and members of Congress are pleading with President Joe Biden to rescind his threat to veto the U.S. congressional resolution to overturn the U.S. Securities and Exchange Commission’s (SEC) crypto accounting rules, in a rare instance of lobbying overlap with the cryptocurrency industry.

The SEC’s Staff Accounting Bulletin No. 121 (SAB 121), a contentious accounting standard that would have forced banks to treat customers’ digital assets differently than other assets and insist they be kept on a bank’s balance sheet, was rejected by Congress in recent bipartisan votes that saw many members of Biden’s party reject his opposition. The lenders concur with the cryptocurrency companies’ assertion that this jeopardises their capacity to transact business with them.

In a letter to Biden on Friday, a number of organisations, including the Financial Services Forum and the American Bankers Association, claimed that “SAB 121 effectively precludes regulated banking organisations from offering digital asset custody at scale since it treats the assets as if they are owned rather than simply custodial by a banking organisation.” “Institutions that are forced to record custodied digital assets on balance sheet are subjected to higher capital, liquidity, and other prudential requirements, unlike their non-bank competitors.”

Sen. Cynthia Lummis (R-Wyo.) and Rep. Patrick McHenry (R-N.C.) also wrote to Biden on May 30, requesting that he refrain from vetoing the legislation or at the very least “work with the SEC to rescind the staff guidance.” The letters were received on the same day.

“Rescinding SAB 121 is well within the SEC’s authority and there is ample precedent for revisiting a staff accounting bulletin,” the letter stated. “In fact, most staff accounting bulletins over the last three decades have been revisions and rescissions of prior guidance.”

Representatives Mike Flood (R-Neb.) and Wiley Nickel (D-N.C.), the sponsors of the resolution, were among the seven other lawmakers who signed the letter.

In his threat to veto the resolution, Biden stated that the SEC would be “inappropriately constrained in its ability to ensure appropriate guardrails and address future issues related to crypto-assets, including financial stability,” if the rule were to be repealed under the Congressional Review Act.

Majority Leader Chuck Schumer (D-N.Y.) and Sen. Ron Wyden (D-Ore.), the chairman of the Senate Finance Committee, were among the 11 Senate Democrats who voted against the president. Wyden stated at CoinDesk’s Consensus 2024 on Friday that the SEC’s policy “basically sets up a different standard for crypto than everybody else has in the financial sector.”

SEC Chair Gary Gensler attempted to clarify SAB 121 this week, stating that it is an effort by the regulator to address the unrest and losses to investors in the cryptocurrency space in 2022. He contended that the announcement was “just” a staff bulletin intended to address the issue of failing cryptocurrency companies treating client assets as a component of their bankruptcy estates.

Biden will have till Monday the 3rd of June to decide whether to veto the measure.