Regulation

US House Passes Vote to Overturn SEC Crypto Accounting Rule

Published

7 months ago

May 9, 2024

Coin2049 Newsletter

The US House of Representatives passed a resolution aiming to overturn a Securities and Exchange Commission (SEC) bulletin on accounting standards for cryptocurrency custodians. The measure, passed by a vote of 228-182, saw significant support from Republicans and backing from 21 Democrats. This move reflects growing tensions between legislative preferences and regulatory measures concerning the digital asset industry.

US House Debates SEC Rule on Crypto Custody

The controversial SEC bulletin, originally issued in 2022, mandates that firms holding cryptocurrencies on behalf of customers must include these holdings as liabilities on their balance sheets. This requirement has sparked debate, with opponents arguing that it makes it excessively burdensome for financial institutions to safeguard digital assets.

The House debate showcased a rare bipartisan approach to an issue that typically polarizes opinion along party lines. House Financial Services Committee Chair Patrick McHenry, a Republican, criticized the SEC’s bulletin for imposing heavy capital and liquidity requirements on banks. According to McHenry, these requirements effectively prohibit financial institutions from handling customers’ digital assets.

On the other side of the aisle, Representative Maxine Waters, a Democrat and the committee’s leading member, defended the SEC’s stance. She argued that the regulation aids in providing transparency and could help prevent the type of fraud that has been seen in the collapse of major crypto firms. Waters also highlighted concerns that overturning the bulletin could restrict the SEC’s ability to issue similar future guidance, potentially undermining regulatory efforts to oversee the burgeoning crypto market.

White House Opposes SEC Crypto Changes

The measure’s future is uncertain as it moves to the Senate, where it must pass through the Senate Banking Committee before a full Senate vote. The White House has already expressed opposition, with a statement indicating that President Joe Biden would veto the resolution. The administration argues that curbing the SEC’s regulatory power would introduce significant financial instability and market uncertainty, an undesirable outcome amid the volatile nature of crypto markets.

The resolution found an ally in Senator Cynthia Lummis, a Republican, who introduced a companion measure in the Senate. The digital commerce community is closely watching the developments, with Cody Carbone, vice president of policy for the Chamber of Digital Commerce, expressing optimism about the measure’s passage due to its focus on consumer protection and regulatory process rather than solely on cryptocurrency.

The potential reversal of the SEC bulletin has broader implications for the regulation of digital assets. Industry stakeholders are concerned about the role of traditional banks in the cryptocurrency space and the extent of regulatory oversight deemed appropriate. The resolution’s proponents argue that the SEC’s requirements are too stringent and stifle innovation and participation in the digital economy.