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U.S. House expected to uphold Biden veto preserving SEC accounting rule

of Biden Administration It is on the brink of scoring an important victory in policing cryptocurrencies.

A resolution to remove regulatory obstacles for traditional investment banks wanting to hold digital assets is unlikely to get enough votes in Congress. House of Representatives According to information obtained by FOX Business, the bill will come up for a vote again on Wednesday to override President Biden’s veto.

The resolution to repeal SAB 121, an accounting bulletin issued by Securities and Exchange Commission staff that broadly bans banks from storing cryptocurrencies, will likely not garner the two-thirds majority needed in the House to override Biden’s veto of the joint resolution, known as HJ Res. 109, according to people with direct knowledge of the vote.

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President Joe Biden speaks at the Rose Garden of the White House in Washington, DC, United States, Tuesday, May 14, 2024. President Biden is increasing tariffs on a wide range of Chinese imports, including semiconductors, batteries, solar cells and critical minerals. (Photographer: Tierney L. Cross/Bloomberg via Getty Images/Getty Images)

Roughly 60 senators would need to change their votes to oppose Biden, but House leaders consider that scenario unlikely. Both the House and Senate voted by simple majorities to repeal SAB 121 before the president’s veto in May.

Some crypto investors said they will be closely watching the results of Wednesday afternoon’s vote to see which Democrats will step up their anti-cryptocurrency stance.

The issue of cryptocurrency regulation has become increasingly politicized in recent months by Republican presidential candidates. Donald Trump He has been courting crypto investors as a potentially important voting bloc in the November election. Echoing Trump’s stance, the Republican National Committee recently included crypto issues in its 2024 policy platform, vowing to “end the Democrats’ illegal and un-American crackdown on cryptocurrency.”

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Some in the cryptocurrency community have hoped that Biden’s disastrous performance in the first presidential debate and recent turmoil within the Democratic Party, which has even led to key members of the party calling for his resignation, might encourage some Democrats in the tight race to try to override Biden’s veto of Senate Resolution 109.

President Trump signed an executive order during a meeting of the American Labor Policy Advisory Committee in the East Room of the White House to reform the federal government's hiring process, replacing one-size-fits-all degree-based hiring with skill-based hiring.

Speaking at a meeting of the American Labor Policy Advisory Committee in the East Room of the White House, President Trump signed an executive order to transform the federal hiring process, replacing one-size-fits-all degree-based hiring with skill-based hiring. (Getty Images)

But congressional sources say the opposite seems to be true, with Democrats apparently unwilling to further weaken the president.

“There is Many Democrats “There’s already been criticism of Biden and many senators don’t want to add to that,” a House staffer who asked not to be named told Fox Business.

“If the veto is overturned right now, I think it’s the end for Biden,” another staffer said.

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The controversy surrounding SAB 121 is that it is implemented in the same manner as a formal rule adopted by the full SEC committee, and not merely guidance issued by agency staff. Leading Republicans like Rep. Patrick McHenry (R-North Carolina) have said that by viewing SAB 121 as “guidance,” the SEC can circumvent Congress and other regulators and does not have to go through traditional rulemaking procedures, such as public comment periods. McHenry called SAB 121 “one of the most flagrant examples of regulatory overreach by SEC Chairman Gary Gensler” and said it prevents highly regulated financial institutions and companies from acting as custodians of digital assets.

Traditional accounting rules allow banks to take traditional financial assets off their balance sheets to manage risk and lower borrowing costs. SEC staff guidance says banks should record cryptocurrencies as both assets and liabilities because of risk factors for cryptocurrencies that traditional assets don’t have (such as hacking ability), but this ultimately increases compliance costs and gives little incentive to store digital assets for clients who want to trade in crypto or exchange-traded fund providers who want to create portfolios.

Gensler called the $2 trillion cryptocurrency market a “lawless zone” for investing, citing various scandals that have affected investors over the years.

Biden echoed Gensler’s sentiments in a letter to Congress following his veto of HJ Resolution 109, saying he “does not want to jeopardize the well-being of consumers and investors” by removing guardrails “necessary to harness the potential benefits and opportunities of cryptocurrency innovation.”

However, industry observers say SAB 121 could put investors at risk by concentrating risk within the small number of platforms that currently store digital assets.

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Coinbase, the largest cryptocurrency exchange in the U.S., is not federally regulated but has been selected as custodian for all six proposed spot ethereum ETFs due to launch in the coming weeks and eight of the 11 spot bitcoin ETFs that began trading in January. Coinbase CEO Brian Armstrong said Coinbase holds about 90% of the $36 billion in bitcoin ETF assets.

According to recent SEC filings, major Wall Street firms such as BlackRock and VanEck, which hold Bitcoin and Ethereum ETFs, are concerned about the risks associated with a single firm managing assets across multiple competing products, and both noted that if Coinbase runs into problems, the impact would be felt across the industry.

Industry observers say the problem is mainly due to banks being excluded by restrictive SAB 121 rules.

Cryptocurrency

FILE PHOTO: In this illustration taken on June 29, 2021, representations of the cryptocurrencies Bitcoin, Ethereum and Dogecoin are placed on a PC motherboard. (REUTERS/Dado Ruvic/File Photo/Reuters Photo)

“By voting to retain SAB121, the president and members of Congress are fostering unnecessary concentration risk and harming U.S. competitiveness,” said Matthew Siegel, head of digital asset research at VanEck.

Lawmakers have also expressed concerns ahead of Wednesday’s vote that SAB 121 poses risks to the security of customers’ digital assets. Democratic Congressman Wiley Nickels of North Carolina He raised the issue with Treasury Secretary Janet Yellen at a House Financial Services Committee hearing on Tuesday.

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“I Senator Flood’s “There are concerns about concentration risk in the crypto custody market because the SEC’s misguided SAB 121 makes crypto less safe for consumers,” Nickel said. “The U.S. has the best banks in the world, and they should be able to handle this custody banking business well.”

Meanwhile, House leaders are considering other ways to repeal SAB 121, including a bill introduced in September by Rep. Mike Flood (R-Neb.) called the Uniform Treatment of Custodial Assets Act. The bipartisan bill, co-sponsored by Reps. Ritchie Torres (D-N.Y.), Wiley Nickel (D-N.C.) and French Hill (R-Arkansas), would make it easier for banks, credit unions and trusts to safeguard digital assets.

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