- United States’ Senate voted to scrap the SEC’s SAB 121 crypto custody policy
- Crypto backers supported the move, but whether the U.S president will veto it remains to be seen
As a researcher with a background in finance and a strong interest in cryptocurrencies, I am closely following the recent development regarding the U.S Senate’s vote to repeal SEC’s SAB 121 policy. This policy has been a subject of controversy since its implementation two years ago, as it presented unique challenges for investment banks looking to offer large-scale crypto custody services.
In an unexpected collaboration between Democrats and Republicans on Thursday, the U.S. Senate passed a bill to annul the Securities and Exchange Commission (SEC)’s contentious Staff Accounting Bulletin 121 (SAB 121) policy. SAB 121, a SEC initiative, was perceived by critics as an obstacle for investment banks in offering comprehensive crypto custody services.
As an analyst, I find it intriguing that Democrats aligned with Republicans in passing the resolution to revoke the policy with a vote of 60 to 38.
It’s important to mention that prior to this action, the White House issued a warning. They expressed concern that such a move could limit the SEC’s capacity to safeguard crypto investors. Additionally, President Joe Biden has stated that he would employ his veto power if necessary.
Community reactions to SAB 121 resolution
As a crypto investor, I’m closely watching the developments regarding the resolution that’s headed to President Biden’s desk. The president has threatened to veto it, and this will be the next significant test in the process. In response to the veto threat, the Blockchain Association made a witty comment.
As a crypto investor, I cannot ignore the reality that the potential for a presidential veto casts a shadow over the rising consciousness amongst voters, especially the younger generation, regarding the significance of cryptocurrencies in our economy and society.
As an analyst, I would emphasize the potential consequences of such a move from the Association’s perspective. Specifically, I would note that approximately half of American voters express mistrust towards politicians who meddle with cryptocurrencies.
The Securities and Exchange Commission (SEC) of the United States issued the contentious SAB 121 directive approximately two years ago, in March 2020. This guidance advised entities managing cryptographic assets for third parties to account for those assets on their balance sheets.
In contrast to how they typically handle traditional stocks, these custodians would approach crypto assets in a distinct manner. The ambiguity surrounding SAB 121 was a significant factor that led Nasdaq and BNY Mellon to reconsider their involvement in crypto custody. Beyond the requirement of substantial financial reserves to protect against potential losses, the lack of clarity from SAB 121 added to their apprehension.
Critics have raised concerns for some time about the risks that come with Coinbase’s prominent role in the crypto custodian industry. With Coinbase holding the keys to 8 out of the 11 US Bitcoin spot ETFs, there is a growing belief that rescinding SAB 121 could lessen these risks by introducing more competition and reducing reliance on a single entity as a point of failure.
Bitwise CEO Hunter Horsley had this to say when the repeal went through,
A significant number of American lawmakers are advocating for the prudent growth of cryptocurrencies within the United States. This isn’t just a few voices, but rather a broad consensus. The year 2024 is expected to mark the beginning of the mainstream adoption of crypto.
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2024-05-17 16:08