SEC Overturns Gary Gensler’s Harsh Crypto Regulation

• The US Senate voted 60-38 to pass a measure overturning the SEC’s Staff Accounting Bulletin (SAB) 121, which establishes certain accounting standards for firms that custody crypto
• The measure will now go to President Biden’s desk, where it is likely to be vetoed
• The House had previously voted to overturn SAB 121, but neither chamber had enough votes to override a presidential veto

The US Senate has passed a measure to overturn a Securities and Exchange Commission (SEC) bulletin that establishes certain accounting standards for firms that custody crypto. The measure will now go to President Joe Biden‘s desk, where it will likely be vetoed.

Background on SEC’s SAB 121

The SEC Staff Accounting Bulletin, also called SAB 121, was first published in 2022. It requires firms that custody crypto to record customer crypto holdings as liabilities on their balance sheets.

The bulletin has drawn controversy over concerns in the crypto industry that it could prevent banks from safeguarding digital assets. Meanwhile, the White House said in a statement that President Biden would veto the measure, arguing it would introduce instability in crypto markets.

Senate Passes CRA Resolution

On Thursday, the Senate voted 60 to 38 on a resolution to overturn SAB 121 under the Congressional Review Act (CRA). The CRA aims to bolster congressional oversight of agency rulemaking.

Several Democrats, including Senate Majority Leader Chuck Schumer, voted for the measure. However, the vote count is below the two-thirds threshold needed in both chambers to override a presidential veto.

The House previously passed the same CRA resolution by a 228-182 vote, also below the override threshold.

Outlook Going Forward

The resolution to overturn SAB 121 is likely to be vetoed by President Biden. However, the bipartisan support for the measure shows growing consensus in Congress around crypto policy issues.

While a veto override is unlikely, the fight over SAB 121 has demonstrated significant grassroots and industry engagement on this issue. As Congress continues to shape crypto regulation, this constituency will remain vocal.