SEC Crypto Guidance Rejected, House Votes Against SEC’s SAB 121 Despite Biden’s Opposition

Developments in the cryptocurrency oversight battle sparked debate and political division, the U.S. House of Representatives voted on Wednesday to approve a resolution rejecting Securities and Exchange Commission (SEC) cryptocurrency accounting guidance known as Staff Accounting Bulletin No. 121 (SAB 121). The resolution, driven by concerns from the cryptocurrency industry and Republican lawmakers, aimed to address what they perceive as deterring banks from handling crypto customers. However, President Joe Biden swiftly expressed his intention to veto the resolution if it reaches his desk.

SAB 121 has been a contentious issue since its introduction, drawing criticism from digital assets businesses and Republican lawmakers alike. The guidance was intended to clarify the accounting treatment for crypto assets, directing banks holding customer’s digital tokens to do so on their balance sheets, potentially incurring substantial capital expenses. However, its implementation has faced backlash, with claims of inadequate handling and lack of consultation with banking regulators.

Representative Mike Flood (R-Neb.), the sponsor of the resolution, characterized SEC Chair Gary Gensler’s approach to digital assets as a “jihad,” accusing him of freezing out large publicly traded banks from custody of digital assets. Flood emphasized the SEC’s failure to engage with banking regulators and argued that Gensler’s involvement in banking matters is unwarranted.

Despite Biden’s strong opposition to the resolution, the House vote saw significant support for its approval, including backing from 21 Democrats who were unmoved by the president’s veto threat. Representative Patrick McHenry (R-N.C.), the chairman of the House Financial Services Committee, criticized SAB 121 as a departure from traditional banking regulations, labeling it a “massive deviation” in the treatment of assets by highly regulated banks.

However, not all Democrats supported the resolution, with Representative Maxine Waters (D-Calif.), the ranking Democrat on McHenry’s committee, cautioning against what she deemed an excessive response. Waters argued that while SAB 121 had flaws, overturning it entirely could jeopardize essential crypto disclosures outlined in the guidance. She raised concerns that reversing the rule under the Congressional Review Act could block similar policies in the future.

The controversy surrounding SAB 121 underscores broader debates about the regulation of cryptocurrencies and the role of government agencies in shaping the digital asset landscape. With the resolution’s approval in the House and Biden’s looming veto threat, the future of cryptocurrency accounting guidance remains uncertain, leaving investors and industry stakeholders in a state of anticipation and uncertainty.

Finance Desk