The House voted to pass a measure aimed at overturning a controversial Securities and Exchange Commission bulletin that establishes certain accounting standards for firms that custody crypto.
The House voted 228-182 on Wednesday, with mostly Republicans in favor of the measure. Twenty-one Democrats voted for it.
The bulletin, which was first published in 2022, has drawn controversy over the past year over concerns in the crypto industry that it could prevent banks from safeguarding digital assets. It requires firms that custody crypto to record customer crypto holdings as liabilities on their balance sheets.
It's unclear if the measure will become law. On Wednesday, the White House released a "statement of administration policy" saying President Joe Biden would veto it.
The White House said that "limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty."
House Financial Services Committee Chair Patrick McHenry, R-N.C., said the bulletin requires banks to take on "significant capital and liquidity" during remarks on the House floor earlier on Wednesday.
“This essentially makes it cost-prohibitive for financial institutions to custody their customers’ digital assets," McHenry said.
Rep. Mike Flood, R-Neb., who introduced the resolution alongside Rep. Wiley Nickel, D-N.C. earlier this year, said the bulletin "upends custodial practice for banks" and keeps banks out of the market" in remarks made earlier on Wednesday.
The committee's leading Democrat, Maxine Waters, D-Calif, accused the bill's sponsors of undermining the SEC on the House floor earlier on Wednesday.
"The bill takes a sledgehammer to fix an issue that may nearly need a scalpel," Waters said. SAB 121 helps provide transparency, which can help prevent the kind of fraud that led to collapses of crypto firms, such as crypto exchange FTX, she added.
Waters also warned that overturning the bulletin could limit the SEC in the future.
"If this resolution is passed, the SEC would be prohibited from issuing any guidance in the future that is substantially similar to this one, including disclosure guidance on this issue," Waters said.
The measure could go to the Senate Banking Committee and thereafter be voted on in front of the full Senate. Sen. Cynthia Lummis, R-Wyo., also has a companion measure in the Senate.
Cody Carbone, vice president of policy for the Chamber of Digital Commerce, said he sees SAB 121 passing out of the Senate.
"I’d hope this would pass with broad bipartisan support because it’s less about crypto and more about consumer protection and process, but it’s still DC," Carbone told The Block. He added that there could be a committee vote and a floor vote before lawmakers' August recess.
In October, the Government Accountability Office said the bulletin is subject to the Congressional Review Act, which requires agencies to submit a report on the rule to Congress. The CRA, enacted in 1996, aims to bolster congressional oversight of agency rulemaking.
"Under the Congressional Review Act, this only needs 51 votes to pass not the traditional 60. I’m optimistic there will be several Ds [Democrats] who support this," Carbone said.
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