US House challenges SEC rule, reflecting bipartisan concerns on crypto regulation.
Debate centers on burdensome requirements for firms handling customers’ digital assets.
US House of Representatives passed a resolution to overturn a contentious Securities and Exchange Commission (SEC) bulletin concerning accounting standards for cryptocurrency custodians. The resolution, passed by a vote of 228-182, garnered significant support from Republicans and 21 Democrats, underscoring growing tensions between legislative preferences and regulatory measures within the digital asset industry.
The SEC bulletin, originally issued in 2022, mandates that firms holding cryptocurrencies on behalf of customers must list these holdings as liabilities on their balance sheets. This requirement has ignited heated debate, with opponents arguing that it burdens financial institutions tasked with safeguarding digital assets.
During the House debate, House Financial Services Committee Chair Patrick McHenry, a Republican, criticized the SEC’s bulletin for imposing heavy capital and liquidity requirements on banks, effectively hindering their ability to handle customers’ digital assets.
On the contrary, Representative Maxine Waters, a Democrat and leading member of the committee, defended the SEC’s stance, asserting that the regulation promotes transparency and helps prevent fraud seen in the collapse of major crypto firms. Waters also expressed concerns that overturning the bulletin could limit the SEC’s ability to issue similar future guidance, potentially undermining regulatory efforts in overseeing the burgeoning crypto market.
What Is The Fate Of This Resolution?
The resolution’s future now rests with the Senate, where it must pass through the Senate Banking Committee before a full Senate vote. However, the White House has already voiced opposition, indicating that President Joe Biden would veto the resolution. The administration argues that limiting the SEC’s regulatory power could introduce significant financial instability and market uncertainty, particularly given the volatile nature of crypto markets.
Senator Cynthia Lummis, a Republican, has emerged as a proponent of the resolution, introducing a companion measure in the Senate. Industry stakeholders, including Cody Carbone, vice president of policy for the Chamber of Digital Commerce, are closely monitoring developments, expressing optimism about the resolution’s passage due to its focus on consumer protection and regulatory processes rather than solely on cryptocurrency.
The potential reversal of the SEC bulletin carries broader implications for the regulation of digital assets. Industry stakeholders are grappling with concerns regarding the role of traditional banks in the cryptocurrency market and the appropriate extent of regulatory oversight. Proponents of the resolution argue that the SEC’s requirements are overly stringent, stifling innovation and participation in the digital economy.
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