A controversial rule issued by the Securities and Exchange Commission (SEC) governing how businesses holding cryptocurrencies for clients must account for those assets was overruled by the US House of Representatives on May 8, 2024. With a little backing from Democrats, the 228–182 vote mostly followed party lines.
Firms serving as cryptocurrency custodians are required by Staff Accounting Bulletin (SAB) 121 to record client holdings as liabilities on their balance sheets. The crypto industry and big banks have criticized this designation, claiming it deters banks from getting into the crypto custody market. SAB 121’s detractors claim that it places unduly strict capital requirements on banks, which would make it less profitable for them to provide crypto custody services.
According to the House measure’s supporters, the SEC exceeded its jurisdiction by releasing the bulletin without allowing for appropriate public discussion. They argue for more teamwork in regulating the cryptocurrency industry. Lawmakers who support cryptocurrencies view this as a move in the right direction toward encouraging innovation and widespread usage of digital assets.
White House Rejects Crypto Changes Made by SEC
The bill is headed to the Senate, where it must pass the Senate Banking Committee before being put to a vote by the entire Senate. This presents an uncertain future. According to a statement, released by the White House expressing disapproval, President Joe Biden is expected to reject the legislation. According to the administration, reducing the SEC’s regulatory authority would result in severe market volatility and financial instability, which is unacceptable given the erratic nature of cryptocurrency markets.
Republican Senator Cynthia Lummis became an advocate of the resolution when she filed a similar bill in the Senate. The world of digital commerce is keeping a careful eye on the events. Cody Carbone, vice president of policy at the Chamber of Digital Commerce, expressed optimism that the legislation will succeed since it places equal emphasis on the regulatory process and consumer protection as it does on Bitcoin.
The SEC bulletin’s possible reversal might have broader effects on regulating digital assets. Industry participants’ concerns center on traditional banks’ involvement in the cryptocurrency field and the degree of necessary regulatory control. The resolution’s supporters contend that the SEC’s rules are excessively onerous and inhibit participation and innovation in the digital economy.
The bill must pass the Senate and withstand a possible veto to become law. Although a few senators have voiced support, it needs to be made apparent if there is enough support to override a veto of the legislation.
The House vote brings attention to the ongoing discussion over bitcoin industry regulation. Some see The SEC’s approach as a safeguard for investors, while others think it stifles innovation and prevents widespread adoption. In the upcoming months, the fate of the House measure and the direction of cryptocurrency regulation will probably be hot topics of conversation.
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