As an analyst with extensive experience in the financial industry and a deep understanding of the crypto market, I believe that the recent developments regarding H.J.Res. 109 and SAB 121 are significant milestones for the crypto community. The bipartisan support for the resolution in Congress, which marked the first standalone crypto legislation, is an encouraging sign of growing acceptance and recognition of the potential of this emerging asset class.
On May 16, 2024, a substantial number of senators in the US Senate utilized the Congressional Review Act (CRA) to initiate a review of Securities and Exchange Commission (SEC) directive SAB 121.
U.S. Senators passed H.J.Res. 109 with 60 to 38 votes, an exceptional rate for the U.S. Congress.
Alongside the impressive backing for H.J.Res. 109, the ballot showed strong bipartisan agreement with a score of 51-49 in favor of Democrats. In Senator Cynthia Lummis’ words, this vote marked an historical achievement as it was the initial instance of a Congressional session enacting a separate crypto legislation.
Before the House of Representatives voted on the bill, President Biden had warned that he would employ his executive authority to veto if there was an attempt to repeal the SEC policy through a resolution.
The White House expressed firm disapproval towards the actions of House representatives aiming to undermine the Securities and Exchange Commission’s (SEC) initiatives to shield investors in cryptocurrency markets and fortify the larger financial system.
With Democratic opposition mounting and Presidential hopeful Donald Trump expressing support for cryptocurrencies, will the president still follow through on his veto threat? Historically, around one-third of threatened vetoes in previous administrations didn’t materialize. Therefore, a veto isn’t certain just because of the threat.
Significant support on both sides for crypto bill
The founder and CEO of the Digital Chamber, Perianne Boring, emphasized the significance of Congress’s strong approval of H.J.Res. 109.
Senator Boring elaborated on the heated debate surrounding SAB 121, which led to a surprising shift among 21 Democratic Senate members, ultimately resulting in their support for the bill and the casting of 12 Democratic votes.
The spotlight was put on Chuck Schumer being one of the Democrats in the Senate who cast his vote in support. It’s noteworthy that Schumer holds a significant role as the Senate majority leader, making him the second most influential figure in the nation, surpassed only by President Biden.
A former congressional aide and TV host shared her perspective on the Democrats’ backing of the Biden administration, characterizing it as a significant shift or turning point. According to her, Schumer’s endorsement could lead the White House to reconsider their approach and stance. She expressed optimism that “the crypto tide is rising in Washington.”
As a crypto investor, I can tell you that the pressure on the Biden administration extends beyond the political realm. The crypto community isn’t the only group urging President Biden to sign H.J.Res. 109. In fact, the American Bankers Association has publicly called on the president to “act swiftly and sign this resolution into law” in order to safeguard American consumers.
The financial industry, specifically banks, stands to benefit economically by providing safekeeping services for cryptocurrencies. This stems from the growing trend of retail crypto adoption and the banks’ desire to reap returns from this emerging market.
The ball is in the court of the White House
After the H.J.Res. 109 broad support, the Biden administration has a complex decision to make.
President Biden faces a crucial decision: Should he veto H.J.Res. 109, considering the potential internal discord it could spark among his party members? Is the passage of SAB 121 absolutely necessary for the Securities and Exchange Commission, causing an intraparty rift with the upcoming U.S. elections so imminent? Biden must carefully consider the advantages and disadvantages before making a choice.
Patrick Kirby, the policy head at Crypto Council for Innovation, shared with CryptoMoon that “the President has eight business days (excluding Sundays) to either approve a resolution as law, take no action and allow it to pass, or reject it with a veto.”
As a crypto investor, I understand that President Biden has the power to “pocket veto” SAB 121 if Congress is not in session when he receives the bill. This means that by not signing or returning the bill within ten days, it will not become a law. Fox journalist Eleanor Terret explains that this can be an effective strategic move for the President to avoid potential political backlash without explicitly vetoing the bill.
As a crypto investor, I’ve been keeping a close eye on the political landscape and how it may impact our industry. While Biden is currently in office, it’s important to consider Trump’s possible shift towards a more favorable stance on crypto regulation. Trump may see an opportunity to win over votes and support from the crypto community for the 2024 election by taking a pro-crypto stance. With the challenges surrounding SAB 121 unfolding, Trump has quickly pivoted from his previously anti-Bitcoin stance to positioning himself as the pro-crypto presidential candidate.
Kirby shared that if the President ultimately chooses to veto H.J.Res. 109, Congress has the option to attempt an override. To achieve a successful override, there is a requirement for a “two-thirds majority of the voting members in both houses of Congress.”
The SEC can solve Biden’s dilemma of veto by revoking SAB 121
Biden faces a tough decision on whether to carry out his veto promise, but there could be an alternative course of action that would significantly advantage his administration.
The SEC may choose to rescind SAB 121 in order to prevent Biden from having to use his veto on the issue. Republican Wiley Nickel stated that SEC president Gary Gensler holds the power to put an end to the ongoing political controversy surrounding the SEC’s contentious cryptocurrency regulation policy.
If the Securities and Exchange Commission (SEC) chose not to uphold Rule 121 (SAB 121), then President Biden would be spared the need to take a stance on overturning it through congressional action.
Commissioner Hester Pierce expressed her disappointment with the SAB 121 regulation during a speech at the May 17, 2024 Blockchain Summit in Washington, hosted by The Digital Chamber. Criticism of this policy has been raised within the regulatory agency as well.
Since its launch, the regulatory agency has received numerous complaints from people stating that “it hasn’t lived up to expectations” and preventing “potential entrants from joining the industry.”
According to SAB 121, listed companies, including banks, must report crypto assets as both an asset and a liability on their balance sheets. This requirement has been met with criticism from lawmakers and industry experts. They argue that this approach could hinder innovation since traditionally, assets held in custody for clients are not included in the balance sheet as they belong to the client.
As a seasoned crypto investor, I’m elated by the fact that Congress is delving deeper into cryptocurrency regulatory issues. In my perspective, this intervention is advantageous for several reasons. Firstly, it offers consumers a greater degree of protection when it comes to securing their digital assets through regulated channels. Secondly, it fosters financial innovation by providing a clear framework for businesses operating in the crypto space. Lastly, this vote serves as an unmistakable signal that significant policy shifts must undergo proper regulatory and legislative procedures.
Biden, as the SEC has the ball in their court, the next move is on them.
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2024-05-18 06:33