Key Takeaways
  • Both houses of Congress acted to block a proposed SEC rule that would be detrimental to crypto assets and to banks seeking to custody them on behalf of customers.
  • Some Democrats joined with Republicans in voting to oppose the rule, despite President Biden promising to veto any such Congressional efforts.
  • The issue is seen by some as important to younger voters, who tend to be supportive of the crypto industry.

During a relatively slow week in Washington, the Congress sent a resolution to the White House that would stop a SEC rule designed to limit the ability of banks to provide custody services for crypto assets.  The proposed SEC rule, known as Staff Accounting Bulletin 121 (SAB 121), would require banks holding crypto assets on behalf of customers to recognize these items on their balance sheets as liabilities, thus raising capital requirements. Banks joined the crypto community in opposing SAB 121.

Last week, the House led the effort to reverse the SEC rule when it passed the resolution of Congressional disapproval on a bipartisan vote of 228 YES to 183 NO. Twenty-one Democrats joined the Republican majority in voting for the resolution.  However, before the vote, the White House issued a Statement of Administration Policy saying that the President supported the SEC rule and viewed it as an important tool “to protect investors in crypto-asset markets.”

Despite the Biden veto threat, the Democratic Senate Leader brought the House-passed resolution up for a vote in the Senate on Thursday. It passed the Senate with a strong bipartisan vote. Twelve Democratic Senators, including Leader Schumer, voted with 48 Republicans to pass the House Resolution on a vote of 60 to 38.

While easily passing the House and Senate, the numbers were well below the 2/3rds margin that would be required to overturn a Presidential veto.  There has been no indication that the White House has had a change of heart, but supporters of crypto have pointed out that this is an important issue for many younger voters, who were an important part of Biden’s winning coalition four years ago.

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