U.S. Congress Passes Landmark Crypto Legislation

In a groundbreaking development, the U.S. Congress has passed its first standalone crypto legislation. The new bill aims to repeal the controversial U.S. Securities and Exchange Commission (SEC)’s Staff Accounting Bulletin No. 121 (SAB 121). Despite this legislative victory, President Joe Biden has signaled his intent to veto the bill, citing concerns about financial stability and market uncertainty.

Last week, the Senate passed a Congressional Review Act (CRA) to overturn SAB 121, marking a significant milestone in financial innovation. U.S. Senator Cynthia Lummis (R-WY) announced the news on social media platform X, celebrating the bill as a triumph against the SEC’s regulatory approach under Chair Gary Gensler. She emphasized, “We are just getting started,” indicating more legislative efforts are on the horizon. The CRA allows Congress to review and potentially nullify regulations imposed by federal agencies.

Controversial SAB 121

SAB 121 requires entities holding crypto assets for users to record these as liabilities and corresponding assets at fair value on their balance sheets. This mandate has faced significant criticism for imposing financial burdens on banks and financial institutions, potentially deterring them from offering crypto asset custody services. House Financial Services Committee Chair Patrick McHenry (R-NC) described SAB 121 as cost prohibitive, stating, “SAB 121 requires financial institutions and firms that are safeguarding their customers’ digital assets to hold those assets on their balance sheet, making it cost prohibitive to do so.” He added, “Staff Accounting Bulletin 121 is one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC.”

Earlier this month, the U.S. House of Representatives voted to overturn SAB 121, followed by the Senate’s approval last week. However, President Joe Biden has threatened to veto the decision. A statement from the White House highlighted concerns: “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto assets would introduce substantial financial instability and market uncertainty.”