Is the US Senate ready to fight the SEC’s SAB 121?

A House resolution to revoke the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121 in the US is expected to pass the Senate in a vote scheduled for Thursday. This decision could have a significant impact on the regulation of the cryptocurrency sector in the US.

In the US, the House resolution gains ground in the Senate

Last week, the House of Representatives took a major step forward by passing the joint resolution 109 a move that could have profound implications for the future of the crypto sector in the US.

Driven by representatives Mike Flood Nebraska Republican, and Wiley Nickel North Carolina Democrat, resolution seeks to rescind controversial accounting bulletin of the Securities and Exchange Commission (SEC). The latter required companies to account for their customers’ crypto assets on their own balance sheets, sparking fierce opposition within the industry.

Despite the threat of a presidential veto brandished by Joe Biden, the resolution succeeded in rallying the support of 21 Democrats in the House and the vast majority of Republicans, testifying to the breadth of concern over the rule. Support for the resolution is not limited to the House of Representatives. Several senators like Kirsten Gillibrand, New York Democrat, have already expressed their intention to vote in favor of of the measure when it passes the Senate.

Well-informed sources indicate that the bill has a good chance of being passed during the vote scheduled for Thursday May 16. Ron Hammondrepresentative of the Blockchain Association an advocacy group for the cryptocurrency industry, also anticipates strong bipartisan support for the resolution.

Opponents of SB 121 argue that it has a chilling effect on major custodians and other companies that would like to hold cryptocurrencies on behalf of their clients. They also criticize the lack of adequate consultation with regulatory agencies and Congress prior to its publication, as well as the absence of a notice and comment period that would have allowed stakeholders to make their voices heard.

A fight against SAB 121, the future of crypto regulation plays out now

In the end, the Senate passed the resolution today by a vote of 60 to 38, and this marks the strong will for crypto development in the US blockchain industry. As Rep. Patrick McHenryNorth Carolina Republican and Chairman of the House Financial Services Committee, the outcome of this vote will determine not only the attention the Senate will pay to this crucial issue, but also the prospects for legislative progress in this field.

At the same time, the Senate’s adoption of the resolution gives new impetus to the bill. FIT21 (Financial Innovation and Technology for the 21st Century) considered to be the most comprehensive legislative proposal on cryptocurrencies to have ever progressed this far in Congress.

However, the SEC seems determined to maintain a strict approach to cryptocurrencies. Documents recently filed by the company Consensys revealed that the regulator had launched an internal investigation into ” Ethereum 2.0″ from March 2023going so far as to describe Ethereum as a “security” that does not benefit from any exemption from registration.

This firm stance by SEC could, however, be called into question if the Senate were to adopt the resolution to cancel the controversial accounting bulletin.

Beyond these immediate considerations, the Senate’s rescission of Bulletin 121 sends a strong signal about lawmakers’ willingness to strike a balance between the need to regulate the cryptocurrency sector and the importance of not stifling innovation with overly rigid rules.

However, the veto of the US President is expected, already announced by the White House. More Senate votes would be needed to override a presidential veto. So this is just the beginning of a long battle. The other vote that could also make such a veto impossible is the one that took place last week in the House – 228 for and 182 against – if two thirds prevail.

This new symbolic vote on Thursday May 16, 2024 paves the way for a more nuanced regulatory approach. Indeed, the market is calling for measures tailored to the specifics of the rapidly expanding blockchain industry and its main application, cryptocurrencies, which can safeguard both investor protection and financial stability.
It seems that the crypto-friendly contagion is only set to continue, marked strongly in 2024 by a wave of institutional adoption which now seems inescapable!