Is there still hope to overturn SAB 121? Biden's stance on cryptocurrency policy may continue to loosen under pressure
As the next television debate and election voting day approach, time is running out for Biden to clarify his stance on cryptocurrency policy in the face of pressure from the Republicans.Author: Weilin, PANews
On July 12, U.S. House members voted on a resolution related to the cryptocurrency accounting announcement SAB 121, failing to overturn President Biden's veto of SAB 121.
However, pro-cryptocurrency legislators may continue their efforts to break the constraints of SAB 121 through a new bipartisan bill, the Uniform Treatment for Custodial Assets Act, or may limit the implementation of SAB 121 through the U.S. House Appropriations Committee in the budget. Meanwhile, an SEC insider revealed that some business practices proposed by companies and financial institutions have received approval from SEC staff, allowing them to operate without the constraints of the controversial SAB 121.
Additionally, a senior advisor to Biden recently attended a star-studded cryptocurrency roundtable, releasing more positive signals.
U.S. House Fails to Overturn Biden's Veto of SAB 121
On July 12, U.S. House members voted on a resolution related to the cryptocurrency accounting announcement SAB 121, resulting in 228 votes against 184. Since the vote did not reach the two-thirds majority threshold (290 votes), the audit guidance from the SEC will remain in effect.
Over the past year, SAB 121 (Staff Accounting Bulletin No. 121) has required digital asset custodians to treat digital assets as liabilities and report them at fair value on their balance sheets. The cryptocurrency industry is generally concerned that it may prevent banks from custodying digital assets, excluding banks from the crypto market.
In February of this year, Republican Congressman Mike Flood from Nebraska and Democratic Congressman Wiley Nickel from North Carolina introduced a resolution to overturn the announcement. Subsequently, the House passed the measure to overturn SAB 121 in May with a vote of 228 to 182, primarily supported by Republicans and 21 Democrats. A week later, the Senate passed the resolution to overturn SAB 121 with a vote of 60 to 38, with several Democrats, including Senate Majority Leader Chuck Schumer, also voting in favor.
However, the resolution to overturn SAB 121 was subsequently vetoed by President Biden.
In a policy statement from the White House in May, it stated: "The government strongly opposes H.J. Res. 109, which would disrupt the SEC's work to protect investors in the crypto asset market and safeguard the broader financial system." The SEC stated that SAB 121 is "non-binding staff guidance" aimed at enhancing investor information disclosure.
Now, although the House's vote to overturn Biden's veto has failed, pro-cryptocurrency legislators have not given up their efforts and are already formulating a Plan B. Congressman Mike Flood from Nebraska indicated that he hopes to overturn the SEC's guidance through "regular legislation" by attaching a related bill to a must-pass legislative document, thereby alleviating the pressure on Democrats to publicly oppose the president.
According to a Democratic staffer familiar with the House leadership's thinking, they did not expect many Democrats to change their votes on July 10.
They believe that passing HR 5741, the Uniform Treatment for Custodial Assets Act, which is being pushed by the aforementioned key legislator Mike Flood and co-sponsored by French Hill, Wiley Nickel, and Ritchie Torres, has a better path to overturn SAB 121.
Republican Congressman Mike Flood, who supports overturning SAB 121, speaks before the House vote
Additionally, the U.S. House Appropriations Committee included a policy rider in its appropriations bill that prohibits the SEC from using related appropriations funds to implement SAB 121. However, the bill must be approved by the Senate to take effect.
Allowing Some Companies to Bypass SAB 121, SEC May Open a Back Door?
According to Bloomberg Tax, an SEC insider revealed that some business practices proposed by companies and financial institutions have received approval from SEC staff, allowing them to operate without the controversial SAB 121.
SAB 121 was released in March 2022, and as some companies in the cryptocurrency industry frequently went bankrupt, some companies have been seeking advice from the SEC on how to develop new policies and processes related to cryptocurrencies. The insider added that the legal guidance of SAB 121 itself has not changed.
When SAB 121 was created, it considered some practical situations in the cryptocurrency industry at the time. "In April 2022, there were still many unanswered questions about how these laws would be implemented, and we saw many participants in the cryptocurrency industry being insufficiently cautious in providing these services, harming many customers," the SEC insider stated.
The insider added that some companies have now demonstrated that certain procedures and technologies they have established allow customers to retrieve their cryptocurrencies in bankruptcy just like obtaining other assets (such as dollars), thus not needing to comply with the obligations of SAB 121.
Nevertheless, more information and disclosure are still needed to determine which companies will be eligible to bypass the constraints of SAB 121 and what the SEC's policy stance on related initiatives specifically is.
On July 12, the probability of former President Trump winning on the prediction market Polymarket has reached 60%
Biden's Senior Advisor Attends Crypto Roundtable, Sends Key Signals
Just two days ago (July 10), a senior advisor to Biden, Anita Dunn, met with dozens of leaders in the cryptocurrency field in her personal capacity. This roundtable was organized by pro-crypto California Democratic Congressman Ro Khanna. Attendees included New York Democratic Senator Kirsten Gillibrand, Colorado Democratic Congressman Joe Neguse, and billionaire Mark Cuban, who supports Biden's re-election but criticizes his administration's approach to cryptocurrencies.
Several attendees described the meeting as "productive" and praised the California Democrats for organizing it.
"I really want to commend Congressman Khanna for bringing together about 30 or more industry leaders and giving them the opportunity to engage directly with Ms. Dunn and her team extending to the White House," said Paul Grewal, Chief Legal Officer of cryptocurrency exchange Coinbase.
Grewal described the meeting as a "critical moment" for the Biden administration to reverse its "almost unanimous hostile attitude" towards cryptocurrencies, while Republicans and former President Trump are supporting the crypto industry. He stated, "We are at a critical moment where Republicans are fully embracing cryptocurrencies and incorporating them into their party platform in very specific and clear ways in the upcoming meetings. Therefore, I believe the current administration needs to make a choice."
Sheila Warren, CEO of the Crypto Council for Innovation, said, "Clearly, the attendees understood the importance and opportunities that cryptocurrencies provide." She added in a statement, "I am hopeful about future conversations and more committed to advocating for this groundbreaking technology that is transforming many systems."
Now, with the next televised debate and election voting day approaching, time is running out for Biden to clarify his stance on cryptocurrency policy in the face of pressure from Republicans.
