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The US Senate plans to vote on Joint Resolution 109 on Thursday, and sources on and around Capitol Hill say they believe the measure will draw enough Democrat support to pass.
Joint Resolution 109, which passed the House of Representatives last week with bipartisan support, aims to invalidate the Security and Exchange Commission’s controversial Staff Accounting Bulletin (SAB) 121.
SAB 121, introduced in March 2022 and enacted the following month, states that digital asset custodians should report a liability and “corresponding assets” on their balance sheets for all custodied cryptocurrencies.
While not an official agency rule, which would have required a public comment period, SEC staff said that SAB 121 is intended to guard against the “significant risks and uncertainties associated with safeguarding crypto assets.”
In the Republican-controlled House, 21 Democrats voted in favor of passing the resolution. In the Senate, the resolution needs a simple majority to pass, meaning at least two Democrats and all Republican Senators would have to vote in favor.
Four people familiar with the matter told Blockworks that multiple Democratic senators intend to vote in favor.
Longtime crypto advocate Sen. Kirsten Gillibrand, D-N.Y., told Blockworks that she will vote in favor of Joint Resolution 109 on Thursday.
“The rule was issued without proper consultation with the respective regulatory agencies or Congress and without going [through] a proper notice and comment period,” Gillibrand said.
“More importantly, it imposes an accounting approach that deviates from established standards, forcing financial institutions to count their customers’ digital assets as their own. This will limit options for consumers and leave them with less, not more consumer protection in cases of bankruptcy.”
Gillibrand last year co-signed a bipartisan letter along with Sen. Cynthia Lummis, R-Wyom., and House Financial Services Committee Chair Patrick McHenry, R-N.C., opposing SAB 121 and asking the Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of The Comptroller of the Currency to step in.
While Democratic Reps. Ritchie Torres of New York and Wiley Nickel of North Carolina also signed the letter, Gillibrand was the only senator from her party who supported the effort.
Nickel on Wednesday penned a letter to SEC Chair Gary Gensler, asking the agency head to withdraw SAB 121 ahead of Thursday’s Senate vote. Nickel later told Blockworks that as of mid-afternoon Wednesday, the SEC had not responded to the letter.
“I’m just trying to make the point and the case to Gary Gensler and the SEC that they’re not serving President Biden’s interests by turning this issue into a partisan political football,” Nickel said in an interview. “And my hope is that Gary Gensler will withdraw SAB 121 and work in a bipartisan way on the custodial banking piece.”
The White House said last week that should the legislation make it to President Joe Biden’s desk, he would veto it.
Gensler defended SAB 121 in December, saying it was “just a staff accounting bulletin,” and it is consistent with precedent set in US bankruptcy court.
“It basically addresses whether liabilities should be on balance sheet, and what we have found actually in bankruptcy court, time and again, many times now, that indeed bankruptcy courts have said that crypto assets are not bankruptcy remote,” Gensler said during a December 2023 appearance hosted by the American Bar Association.
The SEC did not immediately respond to Blockworks’ request for comment.