The next two weeks could be decisive for the Crypto industry as it faces major legislative developments in the U.S. Congress that could reshape the regulatory landscape for digital assets in the United States.
The industry is closely watching the upcoming Senate vote on the repeal of Staff Accounting Bulletin No. 121 (SAB 121). SAB 121 was originally issued by the SEC (U.S. Securities and Exchange Commission) and requires financial institutions to list digital assets in custody for customers on their balance sheets.
This approach differs from traditional custody asset treatment, which does not consider custody assets as part of the company's own balance sheet. Critics argue that this could unfairly inflate a bank's assets and liabilities, lead to increased capital reserve requirements, and could stifle the growth of crypto custody services.
A bipartisan effort to repeal the rule took hold in the House last week, with 21 Democrats joining Republicans in the effort.
Ron Hammond, Director of Government Relations at the Blockchain Association, said via X, “Last week, 21 Democrats took a difficult vote and joined Republicans to repeal the SEC’s SAB 121. This is an issue that is important to both banks/crypto assets and a personal priority for SEC Chairman Gensler.”
The Senate, led by Sen. Cynthia Lummis, is expected to follow suit this week. However, President Biden has indicated that he plans to veto the repeal bill, which would require a two-thirds majority in Congress to override a veto.
“With such razor-thin majorities in both the House and Senate, we’ve seen a number of Congressional Review Acts (CRAs) make it to the president’s desk on a bipartisan basis, only to fail at that stage,” Hammond said. “It takes a two-thirds vote in Congress to overturn it. Biden plans to veto this bill, so that’s a tough hill to climb.”
Another key legislative item on the agenda is a bill introduced by Reps. Larry Bucshon and Lisa Blunt Rochester, R-Calif.
The bipartisan initiative, which is set to be voted on this week, calls for the Commerce Department to serve as the president’s lead advisor on blockchain issues. The bill also proposes the creation of an advisory group within the Commerce Department to further integrate blockchain technology into federal governance and policymaking.
Another high-profile legislative push is the upcoming vote on FIT 21, which will take place on May 23-24. The bill, authored by House Financial Services Committee Chairman Patrick McHenry, represents the first comprehensive attempt to establish a regulatory framework for Crypto assets at the federal level.
Hammond stressed that “FIT 21 is a valuable achievement of Patrick McHenry and the first time Congress has voted on a regulatory framework for Crypto assets. This is a moment that has been brewing for nearly a decade.”
The bill has attracted significant attention, and its amendments will be critical in shaping its final form, appealing to both Democratic and Republican lawmakers.
The legislative efforts come amid increased regulatory scrutiny from SEC Chairman Gary Gensler and greater concerns from the Biden administration about the alleged risks of crypto assets.
The government argues that SAB 121 is essential to protecting investors and maintaining the stability of the financial system. In contrast, many in Congress and the industry believe that the SEC's current approach hinders innovation and fails to provide clear compliance guidance.
Additionally, the intersection of crypto policy and election-year dynamics cannot be underestimated.
Crypto asset policy is emerging as a significant campaign issue, with former President Trump’s recent endorsement of crypto assets and their bipartisan potential.
Hammond noted: “There is little political risk in Trump’s involvement in the crypto space, but there is a lot of upside given the electoral victories of crypto assets in both parties in the primaries. This positions crypto assets as a unique issue that can influence voter demographics, especially younger voters who have shown a sustained interest in digital asset technology.”
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