Senate approves reversal of SEC crypto custody bulletin

On May 16, 2024

The U.S. Senate passed a measure to overturn an SEC bulletin on crypto custody standards, and it is now awaiting President Joe Biden’s expected veto.

The Senate’s vote on Thursday ended with a 60 to 38 majority, falling short of the two-thirds needed to override a veto. Several Democrats supported the resolution, including Senate Majority Leader Chuck Schumer of New York.

The legislative action mirrors a similar move in the House last week, where the measure passed with a 228-182 vote. While predominantly supported by Republicans, 21 Democrats also voted in favor, indicating bipartisan backing though insufficient to counter a veto.

The contested SEC Staff Accounting Bulletin, known as SAB 121, was first issued in 2022. It requires firms handling crypto to list customer holdings as liabilities, a requirement that has stirred debate and opposition within the cryptocurrency industry. Critics argue that such regulations could deter banks from safeguarding digital assets.

“Revoking the SEC’s regulatory authority on crypto-assets would introduce substantial financial instability and market uncertainty,” the White House stated, expressing its intent to sustain the bulletin.

Cody Carbone, Vice President of Policy for the Chamber of Digital Commerce, criticized the potential veto.

“A veto would be nonsensical,” Carbone said, urging the President to recognize the resolution’s bipartisan support not as criticism but as a consensus on prioritizing consumer protection over regulatory bias.

Under the Congressional Review Act (CRA), which allows Congress to examine and overturn agency rules, the SEC’s bulletin could be rescinded. The Government Accountability Office last year identified SAB 121 as a rule subject to this act, contradicting the SEC’s stance that it does not qualify as such.

Ron Hammond, Director of Government Relations at the Blockchain Association, commented on the resolution’s possibilities, noting that a presidential veto was anticipated.

“This isn’t shocking though, as a number of CRAs during Biden’s tenure have made it to his desk on a bipartisan basis and received a veto,” Hammond said.

Hammond also highlighted the growing engagement from grassroots and industry sectors in discussions on crypto regulations in Washington, D.C.

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