According to Blockworks, President Joe Biden has pledged his support for Securities and Exchange Commission (SEC) Chairman Gary Gensler. This comes after the House advanced a resolution to overturn an agency accounting practice. The House approved joint resolution 109, which aims to invalidate the SEC's Staff Accounting Bulletin (SAB) 121, in a 228-182 vote on Wednesday. The resolution is now headed to the Senate. However, the Biden administration has warned that it would veto the resolution if it reaches the president's desk.
The administration stated that limiting the SEC's ability to maintain a comprehensive and effective financial regulatory framework for crypto assets could lead to substantial financial instability and market uncertainty. SAB 121, introduced in March 2022 and enacted the following month, mandates that digital asset custodians report a liability and corresponding assets on their balance sheets for all custodied cryptocurrencies. The SEC staff claims this practice is designed to mitigate the significant risks and uncertainties associated with safeguarding crypto assets.
The joint resolution was introduced in the House in February by Representatives Mike Flood, Nick Wiley, Tom Emmer, Darren Soto, and French Hill. They criticized the SEC for issuing SAB 121 without consulting with prudential regulators and bypassing the notice-and-comment process. They also expressed concern that SABs, while not enforceable rules under securities law, do not require public notice or comment periods and do not reflect the official approval of Commissioners.
All voting House Republicans supported the joint resolution on Wednesday, along with 21 Democrats. Senator Cynthia Lummis, a long-time crypto supporter, introduced a companion joint resolution in the Senate, but it lacked bipartisan support and has not advanced to Committee markup or a vote. With the House's resolution now headed to the Senate, Lummis' effort is essentially dead.
In December 2023, Gensler defended SAB 121, stating it was consistent with precedent set in US bankruptcy court. He could face significant challenges in advancing his agenda after this year's election, especially if Republicans gain control of both chambers in November.