The U.S. Senate’s Decision to Overturn SEC’s Cryptocurrency Custody Policy
Surprisingly, in a bipartisan move, the U.S Senate voted on Thursday to revoke the SEC’s contentious SAB 121 policy. The Staff Accounting Bulletin 121, known as SAB 121, was considered by critics as a barrier to investment banks offering extensive cryptocurrency custody services.
Remarkably, Democrats and Republicans united to pass the resolution to annul the policy with a vote of 60-38.
It is important to highlight that the White House had previously cautioned against such action, stating that it might limit the SEC’s ability to safeguard cryptocurrency investors. The administration also indicated that President Joe Biden would veto the decision if necessary.
Public Response to the Repeal of SAB 121
Next in line is the challenge of the president’s veto threat as the resolution progresses to his desk. Responding to Biden’s warning, the Blockchain Association remarked,
“The looming threat of a presidential veto overlooks the increasing public awareness, especially among the younger generation, regarding the importance of cryptocurrencies to our elected officials.”
The association also emphasized the potentially grave implications of such a move, noting that nearly 48% of American voters distrust candidates who meddle with cryptocurrencies.
The SEC of the United States issued the contentious SAB 121 directive in March of 2020. This regulation required entities holding cryptocurrencies on behalf of others to reflect these assets on their financial statements.
Unlike traditional stocks held by these entities, cryptocurrency assets were to be treated distinctly. The imposition of sizable capital reserves to mitigate risks associated with an unstable financial standing, coupled with the ambiguity surrounding SAB 121, prompted Nasdaq and BNY Mellon to withdraw from the cryptocurrency custody sector.
Industry stakeholders have long expressed concerns over potential risks linked to Coinbase’s dominance in the cryptocurrency custody market. Notably, Coinbase acts as the custodian for 8 out of the 11 issuers of spot BTC ETFs in the United States. Consequently, some believe that repealing SAB 121 could help alleviate the risks related to a single point of failure.
When the repeal was finalized, Bitwise CEO Hunter Horsley expressed,
“U.S. legislators aim to encourage the rational growth of cryptocurrencies in the country. This sentiment is not limited to a few legislators but represents the majority. 2024 marks the dawn of mainstream acceptance.”