The U.S. House of Representatives voted yesterday (11) that it failed to meet the threshold required to override the President's veto of Accounting Bulletin No. 121 (SAB 121). In other words, this announcement, which indirectly prevents financial institutions from providing digital asset custody services and exposes the public to the risks of low-regulation platforms, may take effect in the future.

What is SAB 121? What was his impact?

In March 2022, the SEC Accounting Office issued "Accounting Announcement No. 121 (SAB 121)", which aims to address the risks faced by publicly traded companies in custody of digital assets for their users, and requires companies to fairly account for the digital assets in custody. Value is recorded on the balance sheet.

However, the controversial aspect of the announcement is that large banks may choose not to participate in the custody business because they will be subject to higher capital, liquidity and other audit requirements.

"Non-bank competitors" are not subject to these strict requirements, indirectly forcing people to choose cryptocurrency platforms that lack regulation, posing greater risks to investors and the broader financial system.

("Custody should be considered a corporate liability" The U.S. House of Representatives passed the SEC cryptocurrency accounting rule SAB 121, and the industry rebounded)

In response, two Republican and Democratic congressmen jointly proposed a resolution to "overturn SAB 121" in February, and it was quickly passed by the House and Senate. However, the resolution was ultimately vetoed by President Biden, saying that it would undermine the SEC's protection of investments. The work of researchers and financial systems:

Appropriate safeguards are essential to take advantage of the potential benefits and opportunities presented by cryptoasset innovation.

(Biden uses the presidential veto! Prevent Congress from expanding its power to intervene SEC: Adhering to SAB 121 accounting principles can protect investors)

House fails to override Biden's veto of SAB 121

On Thursday, the House failed by a vote of 228 to 184 in an attempt to override President Biden’s veto of the Congressional Override of SAB 121.

Specifically, a majority of Republicans voted in favor and nearly all Democrats voted against, but the result fell short of the two-thirds threshold required to override a presidential veto.

Arguments in support of overturning SAB 121:

Financial Services Committee Chairman (Republican) Patrick McHenry lamented this, believing that the resolution to overturn SAB 121 was “the first time in history that digital asset-related legislation has achieved consensus in both houses”:

This administration would rather play politics and side with power-hungry bureaucrats than support the American people and the safe use of new technologies.

(American Bankers Association: Please ask Biden to repeal SAB 121 and stop investors from choosing virtual currency platforms with low regulation)

Arguments against overturning SAB 121:

Maxine Waters, a Democrat on the committee, expressed criticism of the move to overturn SAB 121, saying that this was just the encryption industry being dissatisfied with the regulatory results, and revealed:

Several large custodian banks are working with the SEC to finalize details to ensure that these well-regulated entities can provide digital asset custody services under SAB 121.

Has the SEC already opened a backdoor for banking institutions?

It is worth mentioning that Waters’ words seem to have been confirmed. According to Bloomberg Tax, financial institutions have indeed continued to consult with the SEC, and the business practices proposed by some banks have been recognized by the SEC, which can exempt them from tax. Subject to SAB 121.

An SEC insider familiar with the regulator’s practices claims that many large banks have been seeking advice from the SEC on developing new cryptocurrency-related policies since the release of SAB 121:

Several large banks have negotiated with the SEC and obtained approval not to report cryptocurrencies on their balance sheets starting in 2023.

As long as you can ensure that you can still make money when you go bankrupt, can you be exempted?

In addition, he also revealed the ways in which institutions can be exempted from SAB 121:

Companies do not need to comply with SAB 121 as long as they can demonstrate that they have implemented certain procedures or technologies that enable customers to retrieve their cryptocurrencies as if they were any other asset in the event of a hack or bankruptcy.

It added that many companies have made a number of changes to protect assets, including more rigorous accounting audits, asset protection, and relevant personnel’s control rights over user assets.

This article The U.S. House of Representatives failed to overturn Biden’s veto of SAB 121, but the SEC has already opened a backdoor for banks? First appeared in Chain News ABMedia.