Senate Overturns SEC Crypto Rule, Biden's Veto Looms

Senate votes 60-38 to overturn SEC's crypto policy, challenging Biden's veto amid bipartisan concerns over regulation impact.

By Mackenzie Crow

5/16, 14:47 EDT
Bitcoin / U.S. dollar

Key Takeaway

  • U.S. Senate votes 60-38 to overturn SEC's crypto policy, SAB 121, despite President Biden's veto threat.
  • Bipartisan support evident as a dozen Democrats join Republicans; however, the resolution is not veto-proof.
  • First time both chambers of Congress pass standalone crypto legislation, challenging SEC's regulatory approach.

Bipartisan Effort Challenges SEC Rule

In a significant move, the U.S. Senate, following the House of Representatives, voted 60-38 to overturn the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin No. 121 (SAB 121), a policy that has stirred controversy within the crypto industry. Despite President Joe Biden's vow to veto the resolution, this marks a notable bipartisan effort against the SEC's stance on crypto regulation. SAB 121, introduced by the SEC in 2022, mandates companies holding customer cryptocurrencies to include these assets on their balance sheets, a requirement with potentially profound capital implications for banks serving crypto clients.

Congressional Review Act Invoked

The resolution to overturn SAB 121 was pursued under the Congressional Review Act, which allows Congress to nullify federal rules. This legislative action saw support from both sides of the aisle, with a dozen Democrats joining Republicans, showcasing a rare bipartisan agreement in the realm of crypto regulation. Notably, Senate Majority Leader Chuck Schumer (D-N.Y.) and other Democratic leaders sided against the SEC's policy, highlighting the growing concern over the SEC's approach to crypto assets. The Government Accountability Office supported this stance, finding the SEC had erred by not undergoing the necessary rule-making process for SAB 121.

Crypto Industry and Legislative Responses

The crypto industry and its advocates in Congress have criticized SAB 121 as overreaching and detrimental to financial innovation. Sen. Cynthia Lummis (R-Wyo.), a proponent of the resolution in the Senate, labeled the bulletin a "disaster" for not adequately protecting consumers. Rep. Kyle Flood (R-Neb.) and Rep. Wiley Nickel (D-N.C.), who played significant roles in the resolution's passage, emphasized the bipartisan opposition to SAB 121 and urged President Biden to reconsider his veto threat. They argue that the SEC's action bypasses the statutory rulemaking process and exceeds its regulatory authority, potentially stifling America's digital financial future.

Management Quotes

  • Sen. Cynthia Lummis (R-Wyo.):

    "This is a win for financial innovation and a clear rebuke of the way the Biden administration and Chair Gary Gensler have treated crypto assets and marks the first time both chambers of Congress have passed standalone crypto legislation."

  • Rep. Kyle Flood (R-Neb.):

    "It is clear there is overwhelming opposition to SAB 121, and I urge President Joe Biden to reconsider his previous statement of intent to veto the resolution. The President should sign my resolution to ensure the SEC reverses course and sets America on a path to growing our digital financial future."

  • Rep. Wiley Nickel (D-N.C.):

    "Today's Senate vote to repeal SAB 121 sends a clear bipartisan message: Congress will not stand idly by as Gary Gensler and the SEC deliberately sidestep the statutory rulemaking process and overstep their regulatory authority."