Crypto Firms Win in Senate, But Biden Veto Looms pen_spark

• Senate votes to overturn SEC crypto accounting rule (SAB 121)
• Industry fears rule could increase financial burdens
• Biden veto expected, raising debate over regulatory authority

The U.S. Senate voted 60-38 on Thursday to overturn a rule issued by the SEC regarding the accounting treatment of crypto assets held by companies on behalf of their customers. The rule , known as Staff Accounting Bulletin No. 121 (SAB 121), requires such companies to record these assets on their balance sheets, which some industry participants argue could increase their financial burdens.

Despite receiving bipartisan support, the resolution faces a likely veto by President Biden. The administration has expressed concerns that scrapping the rule would weaken investor sentiment and potentially destabilize the financial system. Notably, twelve Democrats joined Republicans in voting for the resolution, but the measure fell short of the two-thirds majority needed to override a presidential veto.

Proponents of the resolution, including Senator Cynthia Lummis (R-WY), argue that SAB 121 stifles innovation within the cryptocurrency industry. They also criticized the SEC for bypassing the standard rulemaking process while issuing the bulletin. The Government Accountability Office (GAO) previously identified irregularities in the SEC’s implementation of the rule.

The SEC, however, maintains its position that SAB 121 is essential for investor protection. The agency cites past failures of crypto firms where customer assets were lost due to inadequate safeguards. The SEC argues that the rule promotes transparency by requiring companies to disclose their holdings of crypto assets on behalf of clients.

This vote marks a significant development, representing the first time both chambers of Congress have passed legislation specifically targeting the crypto industry. It also underscores the ongoing debate concerning the authority of regulatory agencies to establish non-binding guidance documents. The SEC’s stance on SAB 121 and the broader issue of crypto asset accounting will likely continue to be a point of contention.