Biden will veto a resolution that challenges the SEC’s crypto regulations, citing concerns for financial stability.
A resolution (H.J. Res. 109), introduced by the Biden administration, seeks to repeal SEC Staff Accounting Bulletin 121 (SAB 121), the rulebook for how financial institutions may deal with cryptocurrency. On May 8, the administration said that rolling back these rules would undermine the SEC’s attempts to protect investors and maintain financial stability. Following backlash to SAB 121’s strict requirements for financial institutions working with cryptocurrency, the government has decided to support the SEC’s rulings. Their reasoning is based on the belief that the SEC’s policies were a well-considered reaction to actual hazards that caused customers to suffer large losses.
In the judgement of the administration, challenging SAB 121 via the Congressional Review Act would unreasonably limit the SEC’s authority to oversee the cryptocurrency market, which might cause financial instability and insecurity. President Biden has promised to veto H.J. Res. 109 if it passes Congress. On May 8, the House of Representatives will hold a vote over this resolution. The resolution has the backing of House Financial Services Committee Chairman Patrick McHenry, who has spoken out against SAB 121, describing it as an example of inappropriate overreach by the SEC under Gary Gensler.
McHenry claims that the SEC is trying to avoid public comments and regulatory procedures by referring to these regulations as just staff recommendations. According to McHenry, SAB 121 might make customer funds more susceptible to theft if fewer banks participate because it imposes excessive costs on financial institutions that want to provide cryptocurrency custody services. The resolution, originally introduced by Congressman Mike Flood, has the backing of Representative Tom Emmer.
Concerned about the consequences for financial institutions that have client cryptocurrency on their books, the banking sector has also spoken out against SAB 121. Since the rule’s implementation in 2022, the American Bankers Association (ABA) has brought attention to its issues. According to the ABA, the high reserve and capital requirements make banks essentially unable to function as custodians for spot Bitcoin ETFs. The American Bar Association has asked the SEC to make changes to SAB 121 instead of doing away with it altogether, indicating a preference for changes over full revocation in order to achieve regulatory objectives without excessive obligations.
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