House Debates Overriding Veto of Joint Resolution Nullifying SEC Accounting Rule
Commentary by Samuel Ramer
House Financial Services Committee Chair Patrick McHenry urged representatives to override President Biden's veto of a joint congressional resolution of disapproval on SEC Staff Accounting Bulletin ("SAB") No. 121.
The joint resolution, passed by both the House and the Senate, nullified an SEC rule which provided accounting and disclosure guidance for entities related to their obligations to safeguard crypto assets held for users of its platform. SAB No. 121 required SEC-registered banks and other issuers that provide custodial services for digital assets to take those assets onto their balance sheet, rather than treating them as being in custody.
President Biden had said he vetoed the joint resolution because it would "inappropriately constrain the SEC's ability to set forth appropriate guardrails and address future issues." (See related coverage.)
Mr. McHenry described SAB 121 as "one of the most glaring examples" of SEC regulatory overreach. He stated that the accounting guidance "limits consumers' options to safely custody their digital assets, upends decades of bank custody practices, and increases concentration risk." He pointed out that the legislation to undo SAB 121 had received significant support in Congress, including from a substantial number of Democratic legislators.
Commentary
Chair McHenry's effort to overturn President Biden's veto of H.Res. 109, which itself seeks to overturn SAB 121, is a demonstration of Republicans' determination to push back against an increasingly aggressive Securities and Exchange Commission. By trying to overturn the veto, Chairman McHenry seeks several things:
1) Place a political marker against SAB 121 to be overturned by legislation in the next Congress, should Republicans control Congress;
2) Determine the depth of Democratic opposition to SAB 121. It's politically difficult to get members of the President's party to vote in favor of overturning a veto. If Democrats are willing to vote against their President, even if the measure fails, it will reveal the depth of support for a legislative effort next Congress;
3) Solidify political support for Republicans from the financial and crypto industries in this election cycle. This is probably the last chance to overturn SAB 121 using the Congressional Review Act–under the arcane rules of the CRA, the next Congress will probably not be able to vote a Resolution of Disapproval due to time constraints, thus requiring specific legislation to overturn SAB 121.
Related Articles
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President Biden vetoed H.J.Res.109, a congressional resolution of disapproval on SEC Staff Accounting Bulletin No. 121.
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The U.S. House of Representatives passed a resolution to "disapprove" SEC Staff Accounting Bulletin No. 121, which prevents banks from providing custodial services to "digital assets [investors by requiring them to keep] those assets on their balance sheet."
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SIFMA supported a Congressional joint resolution sponsored by Senator Cynthia Lummis (R-WY) and Representatives Mike Flood (R-NE) and Wiley Nickel (D-NC) to disapprove SEC Staff Accounting Bulletin No. 121, which prevents banks from providing custodial services to digital assets investors by requiring them to keep those assets on-balance sheet.