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The U.S. Senate has decisively overturned a rule by the Securities and Exchange Commission (SEC) that restricted financial institutions from engaging in cryptocurrency-related activities. This rule had mandated that banks reflect customers’ digital assets on their balance sheets, backed by corresponding capital — a policy criticized for stifling innovation.
Senate Votes Overwhelmingly Against SEC’s Rule
In a major decision on May 16, the Senate voted 60 to 38 to pass H.J.Res. 109, a resolution that nullifies the SEC’s Staff Accounting Bulletin No. 121. This decision reflects a strong disapproval across party lines and highlights a broader legislative push against overregulation.
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The Blockchain Association hailed this as a momentous stance against what is seen as an impediment to financial innovation.
1/ Today, the Senate voted, in overwhelmingly bipartisan fashion, to #repealSAB121, an anti-innovation accounting bulletin which was improperly issued by the SEC in 2022.
— Blockchain Association (@BlockchainAssn) May 16, 2024
The relationship between the crypto market and the SEC has been fraught with tension, characterized by persistent legal battles and a regulatory approach that the industry perceives as overly aggressive. This latest legislative action is a critical change, with the Senate taking a clear position against one of the SEC’s most controversial regulations.
Bipartisan Support Faced Presidential Veto Threat
The resolution received bipartisan support in the Senate, which is currently under a narrow Democratic majority. However, the backdrop to this legislative victory includes President Joe Biden’s warning of a potential veto.
On May 8, prior to the resolution’s passage in the House, President Biden expressed concerns about protecting investors and the broader financial system. His veto could send the bill back to Congress, where it would need a two-thirds majority to override his decision.
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“It is clear there is overwhelming opposition to SAB 121, and I urge President Biden to reconsider his previous statement of intent to veto the resolution.”
Rep. Mike Flood
This legislative move has also sparked discussions about the general implications for crypto regulation. The vote hints at possible shifts in how the SEC and the Commodity Futures Trading Commission might regulate digital assets in the future.
Notably, the Financial Innovation and Technology for the 21st Century Act, which aims to clarify these regulatory roles, is slated for discussion in the House soon.
Public Sentiment on Crypto is Bad
The Blockchain Association pointed out the growing public interest in crypto, especially among younger voters, suggesting that this demographic shift could influence future political campaigns. A DCG poll indicates that nearly half of swing state voters distrust political figures who oppose crypto initiatives.
Senator Cynthia Lummis emphasized that this was the first session of Congress to pass standalone crypto legislation, marking a historic moment for the Senate. Meanwhile, Representative Mike Flood, who sponsored the resolution, urged President Biden to reconsider his stance given the strong opposition to the SEC’s rule among lawmakers.
The Senate passing a CRA overturning SAB 121 is a win for financial innovation and a clear rebuke of the way the Biden admin and Gary Gensler have persecuted crypto.
— Senator Cynthia Lummis (@SenLummis) May 16, 2024
It also marks the 1st time Congress has passed standalone crypto legislation.
We are just getting started.
This decision could also set the stage for upcoming debates on the Financial Innovation and Technology for the 21st Century Act, further reshaping crypto regulation.