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In a significant bipartisan move, the U.S. House of Representatives voted to overturn the SEC's Special Accounting Bulletin (SAB 121), which had barred banks from holding cryptocurrency assets. The resolution, facing a threatened veto from President Biden, aims to restore banks' ability to custody crypto assets.
House Passes Bill to Nullify SEC Crypto Regulations Amid Presidential Veto Threats
According to Cointelegraph, the US House of Representatives has reversed controversial Securities and Exchange Commission guidelines prohibiting banks from owning cryptocurrency.
However, President Joe Biden threatened to veto the new law earlier in the day if it reached his desk.
On May 8, the House voted to pass a bipartisan bill called H.J. Res 109, which overturns the SEC's Special Accounting Bulletin (SAB 121), which mandates banks to include their customers' crypto assets on their balance sheets, which is not the case for traditional investments like stocks.
Republican Congressman Mike Flood, who introduced the resolution, claimed SAB 121 was unfair to banks seeking cryptocurrency because custodial assets are "always considered off-balance sheet."
Notably, 21 Democrats voted in favor of the law, which, combined with the unanimous 207 votes from Republicans, resulted in the bill passing 228 votes to 182.
President Joe Biden has announced that he will veto the new measure despite passing through the House of Representatives.
In a May 8 statement, the White House said it "strongly opposes" members of the House of Representatives who want to overturn SAB 121, stating that doing so would disrupt the SEC's work "to protect investors in crypto-asset markets and to safeguard the broader financial system."
"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."
SEC’s SAB 121 Faces Backlash for Stifling Banks’ Role in Crypto Custody
SAB 121, introduced by the SEC in March 2022, provides the regulator's accounting guidelines for institutions seeking to store crypto assets. Notably, SAB 121 effectively prohibits banks from custodying cryptocurrency assets on behalf of clients.
US politicians, notably SEC Commissioner Hester Peirce, have claimed that SAB 121 jeopardizes regulated banks' willingness to function as crypto custodians and regards cryptocurrency holdings differently than other assets.
"By overturning SAB 121, the bipartisan resolution ensures consumers are protected by removing roadblocks that prevent highly regulated financial institutions and firms from acting as custodians of digital assets," wrote the House Financial Services Committee (HSFC) in a May 8 statement.
"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," said HSFC Chairman Patrick McHenry.
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