US Senate Votes to Nullify SEC Crypto Rule

On May 16, the U.S. Senate passed a joint resolution with a 60 to 38 vote, calling for the Securities and Exchange Commission (SEC) to overturn a rule affecting financial institutions that work with crypto firms. The resolution, H.J.Res. 109, aims to nullify the SEC’s Staff Accounting Bulletin No. 121.

Controversial SEC Rule

The SEC rule requires banks to include customers’ digital assets on their balance sheets and maintain capital against them. Many lawmakers and industry leaders have criticized this measure, arguing that it stifles innovation in the crypto industry.

“The tally, a stunning 60 ‘Yeas’ in the Senate vote, sends a strong signal that both houses of Congress, across the political divide, clearly disapprove of this rule,” said the Blockchain Association in a May 16 post on X.

Presidential Veto Threat

President Joe Biden has expressed his intent to veto the resolution, stating it is necessary to “protect investors in crypto-asset markets and to safeguard the broader financial system.” If the President vetoes the bill, it will return to Congress and require a two-thirds majority vote to pass again.

“The threat of a presidential veto denies the fact that there is a growing awareness among the voting public, particularly young people, that crypto is something our elected officials should care about,” added the Blockchain Association.

US Senate Bipartisan Support

The vote represented a rare bipartisan effort in the US Senate, which is currently split 51-49 in favor of Democrats. Senator Cynthia Lummis noted that this was the first standalone crypto legislation passed by Congress this session. The White House has not yet released a statement on the resolution passing.

Representative Mike Flood, who sponsored the resolution, urged President Biden to reconsider his veto threat. “It is clear there is overwhelming opposition to SAB 121,” Flood stated.

This resolution could pave the way for other crypto-related legislation, such as the Financial Innovation and Technology for the 21st Century Act. This bill aims to clarify the roles of the SEC and Commodity Futures Trading Commission in regulating digital assets. It passed out of committee in July 2023 and is expected to be introduced in the House for a floor vote in May.