Bitcoin
Does the SAB 121 vote mean anything for future crypto legislation?
The US Senate joined the House of Representatives in voting to repeal a controversial US Securities and Exchange Commission (SEC) accounting rule that imposed onerous capital requirements on cryptocurrency custodians. This is relatively important considering that the so-called Personnel Accounting Bulletin, also known as SAB 121, was one of the few things that the crypto and banking sectors aligned themselves in opposition to.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates. This is an excerpt from The Node newsletter, a daily digest of the most important crypto news on CoinDesk and beyond. You can subscribe to get the full content newsletter here.
Unfortunately, however, the legislative measure is now on its way to President Joseph Biden’s desk, who has promised to veto it in a show of solidarity with the SEC. Although several high-profile Democrats, including New York Senator Chuck Schumer, voted in favor of repealing the ballot measure, the 60-38 vote in the Senate on Thursday failed to pass the threshold to override a presidential veto.
The voting results are difficult to read, which almost suggests a realignment of sorts among lawmakers willing to pass decent crypto regulations (or at least repeal bad ones). Then again, there are a number of reasons why it would make sense to abandon SAB 121, not the least of which is that the nonpartisan Government Accountability Office found that the SEC forced it through without proper congressional oversight.
Of course, Senator Elizabeth Warren, always antagonistic and skeptical of crypto, voted to keep the rule in place, arguing “The unique risks of crypto can create liabilities that seriously impact a company’s financial condition. SAB 121 simply clarifies how companies should account for these risks in their financial disclosures.” But still, is bipartisan support a good sign for other legislative efforts, like the stablecoin proposal and market structure bills under consideration?
“I hate to be a downer here, but I don’t think D’s support for rescinding the crypto accounting rule means a veto won’t happen. I think supporters of the anti-SBA 121 vote were taken because they know the White House will veto it. It’s the cart, not the horse,” said James Wester, head of crypto and co-head of payments at Javelin, on X. Apparently, it’s easier to vote for something you know will end up being challenged?
Meanwhile, Austin Campbell, an associate professor at Columbia Business School, said Thursday’s vote proves that crypto is bipartisan. “This is an American issue, not a partisan one,” he he said.
Whatever the case, it is worrying how poor crypto legislation is. A rule that two pluralities vote in favor of, which is widely criticized by industry players and has even been called “idiot” by seasoned actors like Nadine Chakar, often called one of the most important women in finance who helped found State Street Digital and now runs DTCC’s crypto unit (and who speaks at Consensus 2024), will likely remain in place.
This is not just a purely academic question, because SAB 121 – while technically “non-binding” – is already affecting the ability of financial institutions to enter the cryptocurrency custody business, according to an open letter signed by the Bank Policy Institute (BPI), American Bankers Association (ABA), Financial Services Forum (FSF) and the Securities Industry and Financial Markets Association (SIFMA) in February.
I mean, this is a bit of a counterfactual, but how advanced would sectors like stablecoins and interbank blockchain rails be if clear regulations had been written years ago? It seems trivially true that regulatory uncertainty (and, more recently, hostility) has prevented companies from experimenting with cryptocurrencies. For example, surely some big custodians would be interested in custody of all that bitcoin ETF, as Fortune’s Jeff John Roberts said. wrote recently.
It’s interesting that 12 Democrats in the Senate could come together to help overturn a harmful rule, but I’m not sure the story of SAB 121 is really that encouraging.