House Financial Services Committee Chairman Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY) have taken a significant step by leading a letter urging President Joe Biden to reconsider vetoing the bipartisan Congressional Review Act (CRA) resolution overturning Securities and Exchange Commission (SEC) Staff Accounting Bulletin 121 (SAB 121). This move aims to address the current prohibitive situation for highly regulated financial firms looking to provide custody services for Bitcoin and other cryptocurrencies.
The letter emphasizes the bipartisan nature of the vote on H.J. Res. 109, which passed the Senate with a 60-38 margin and the House with a 228-182 majority. The urgency of the situation is underscored by the protection of essential custody services and the interests of consumers, as highlighted by Chairman McHenry. Additionally, Senators Kirsten Gillibrand (D-NY), Representatives French Hill (R-AR), Ritchie Torres (D-NY), and other lawmakers have also called for the regulators to declare SAB 121 as unenforceable following the Government Accountability Office’s classification of it as a rule under the CRA.
A critical development in this push occurred on November 15 when Chairman McHenry, Senator Lummis, Flood, Nickel, Gillibrand, Hill, and Torres presented their argument to federal regulators. Subsequently, on February 1, Senator Lummis, Flood, and Nickel introduced the bipartisan CRA, signaling a concerted effort to address the challenges posed by SAB 121.
The potential for a presidential veto has been a looming concern, with President Biden expressing intentions to veto the resolution in the interest of investor protection and financial system stability. The threshold for overriding a presidential veto would require a two-thirds majority in Congress, adding further complexity to the situation.
Recent shifts in the US regulatory landscape have introduced new dynamics that could influence President Biden’s decision regarding the SAB 121 overturn. Notably, the SEC’s evolving stance towards the approval of a spot Ethereum ETF has been attributed to political considerations, suggesting a greater willingness to navigate the complexities of the cryptocurrency market.
Furthermore, the emergence of a crypto-friendly approach in the campaign of former President Donald Trump has added a layer of political significance to the decision-making process. President Biden may be inclined to consider the broader implications of his position on cryptocurrency regulation, especially in light of the evolving political landscape and the preferences of a significant segment of the electorate.
The multifaceted nature of the SAB 121 overturn debate underscores the intricate interplay between regulatory frameworks, political dynamics, and market trends. Stakeholders across the financial and crypto sectors are closely monitoring the developments, recognizing the potential implications for investor confidence, innovation, and market dynamics.
As the decision-making process unfolds, stakeholders are advised to stay informed and actively engage with the evolving regulatory landscape. The outcome of the SAB 121 overturn debate will likely have far-reaching consequences for the future of regulated financial firms’ engagement with cryptocurrencies, shaping the broader narrative of crypto regulation in the US and beyond.
