On July 11, the US House of Representatives fell short of the two-thirds majority needed to override President Biden’s veto on legislation to repeal SAB 121. The document effectively prohibited banks from holding digital assets on their balance sheets, reports The Block.
The bulletin remains in effect. A total of 228 congressmen voted for its annulment, falling short of the required 290. Had the threshold been met, a similar decision would have been needed from 67 out of 100 senators.
The SEC issued SAB 121 in April 2022. In February 2024, four industry organizations appealed to the agency to ease the document’s provisions. Commissioner Hester Peirce described the bulletin and related guidance as a “pernicious weed”.
Earlier, Senator Cynthia Lummis and Congressman Patrick McHenry highlighted the increased risk of client fund loss due to the collapse of a crypto custodian under the rule’s implementation.
In May, the Senate approved a resolution to annul SAB 121. Subsequently, the House of Representatives passed a bill. Notably, the same 21 Democrats and 207 Republicans voted for its approval in the House as did for the veto override.
Despite the initiative’s rejection, Maxine Waters, representing the Democrats on the House Financial Services Committee, announced negotiations to amend SAB 121. The parties aim to introduce changes that would allow custodial banks to offer digital asset storage services.
Bloomberg, citing sources within the agency, reported that SEC staff have been advising institutions and brokers on how to avoid reflecting cryptocurrencies on their balance sheets in compliance with regulatory rules.
“[Without changes to SAB 121] You can’t approach some of the largest and oldest financial institutions in the US because they’re not allowed to play this game,” commented Aaron Jacob of TaxBit.
According to the agency’s source, several major banks have received the “green light” since 2023 to bypass the rules, ensuring the protection of client assets in the event of bankruptcy.
Approved internal precautionary measures will mitigate emerging legal risks. Officials expressed satisfaction with the countermeasures provided for potential threats, the source indicated.
The SEC’s change in stance on accounting will expand the range of companies US residents can choose for cryptocurrency storage.
Back in May, the House of Representatives passed a comprehensive cryptocurrency regulation bill known as FIT21.
The document provides for the expansion of the Commodity Futures Trading Commission’s powers and funding to oversee cryptocurrency spot markets and “digital commodities,” including Bitcoin.
FIT21 also establishes a procedure allowing digital commodities to be traded on the secondary market if they were “initially offered as part of an investment contract.” The bill includes provisions on stablecoins and anti-money laundering measures.