Senate Votes to Repeal Controversial SEC Crypto Rule: Will Biden Veto?

Senate Repeals SEC’s Crypto Custody Mandate: Awaiting Presidential Decision

In a significant Senate Vote, the U.S. Senate passed Joint Resolution 109 on Thursday, aiming to overturn the Security and Exchange Commission’s controversial SEC Crypto Rule—Staff Accounting Bulletin (SAB) 121. This critical piece of crypto legislation now moves to President Joe Biden’s desk, where it faces a potential veto.

Bipartisan Support in the Senate

The Senate Vote received backing from twelve Democratic Senators, including prominent figures such as Kirsten Gillibrand (NY) and Chuck Schumer (NY), signaling strong bipartisan opposition to the SEC Crypto Rule. Their support reflects growing concern about the regulatory burden imposed by SAB 121 on the digital asset industry.

Understanding SAB 121

Implemented in April 2022, SAB 121 requires digital asset custodians to list both a liability and a corresponding asset for all cryptocurrencies under their control. The SEC Crypto Rule was introduced to address the risks and uncertainties tied to crypto asset custody. However, critics argue that this crypto legislation could discourage institutional involvement in the space and stifle innovation.

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House Approval and Presidential Veto Threat

Last week, the Republican-controlled House also passed the resolution with the support of 21 Democrats. The Biden administration has expressed its intention to veto the legislation if it reaches the President’s desk. The administration stated, “SAB 121 was issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers.” They emphasized that invoking the Congressional Review Act could limit the SEC’s ability to enforce appropriate safeguards and address future issues related to crypto assets and financial stability.

Legislative and Regulatory Implications

Rep. Wiley Nickel (D-NC), a key supporter of the repeal effort, urged SEC Chairman Gary Gensler to withdraw SAB 121 prior to the Senate Vote. After the Senate Vote passed with bipartisan backing, Nickel emphasized the message behind it: “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.” This development marks a critical turning point in ongoing debates around crypto legislation and regulatory overreach.

Next Steps

President Biden now has ten days, excluding Sundays, to either sign or veto the resolution. His decision will carry significant weight, shaping how the SEC Crypto Rule is enforced going forward. If the resolution is enacted, it could set a precedent for future crypto legislation and potentially curb the SEC’s unilateral actions regarding digital asset oversight. Market participants and policymakers alike are closely watching the implications of this challenge to the SEC Crypto Rule on the broader regulatory landscape.