US Legislators Fail to Override Biden’s Veto on SAB 121 Resolution
Last night, US lawmakers voted 228-184 in a failed attempt to override President Joe Biden’s veto on a legislative measure aimed at overturning Staff Accounting Bulletin No. 121 (SAB 121) from the SEC.
The vote did not reach the two-thirds majority needed to overturn the presidential veto, thus keeping the bulletin in effect.
Context and Controversy of SAB 121
SAB 121, also known as Staff Accounting Bulletin No. 121, has sparked controversy over the past year due to concerns in the crypto industry. The bulletin requires companies holding cryptocurrencies on behalf of their clients to record these assets as liabilities on their balance sheets. This requirement has been perceived as a threat to banks’ ability to secure digital assets.
Details of the Resolution
Representatives Mike Flood and Wiley Nickel introduced the resolution to overturn SAB 121 in February. In May, the House voted 228-182 in favor of repealing the bulletin, with mostly Republicans and 21 Democrats supporting the measure. A week later, the Senate voted 60-38, with several Democrats, including Senate Majority Leader Chuck Schumer, in favor of the measure.
Opposition from President Joe Biden and the SEC
Time and again, we have seen crypto companies go bankrupt and their clients line up in bankruptcy court hoping to recover what they believed was legally theirs.
This resolution was subsequently rejected by President Biden. The White House stated in May that the administration strongly opposed the passage of H.J. Res. 109, arguing that it would disrupt the SEC’s efforts to protect investors in the crypto-asset markets and safeguard the broader financial system.
The SEC has stated that SAB 121 is a “non-binding guidance” that enhances disclosures for investors. An SEC spokesperson explained that these disclosures provide investors with important visibility into the level of risk taken by crypto custodians. They also mentioned crypto company bankruptcies and risks to investors when assets are hidden off balance sheets.
Reactions from Congress Members and Outlook
Maxine Waters, ranking member of the House Financial Services Committee, criticized the repeal of SAB 121, stating that the crypto industry did not like the response they received. She mentioned that a special interest group representing major custodian banks and the SEC were negotiating details to avoid a “hammer blow” effect.
The Chairman of the House Financial Services Committee, Patrick McHenry, stated that the House and Senate’s move to pass the repeal measure of SAB 121 in May was the “first-ever specific legislation on digital assets” to pass both chambers. McHenry accused the administration of playing politics and allying with power-hungry bureaucrats at the expense of the American people and new technology.
