The U.S. lower congressional chamber has passed a bill, H.J. Res 109, aiming to repeal the Securities and Exchange Commission’s (SEC) rule that prevents financial institutions from holding digital currency assets. With a 228 to 182 vote, the bill’s future now depends on Senate approval and potential presidential endorsement.
Repealing the rule could open the door to direct involvement of banks in the field of blockchain and cryptocurrency. Supporters argue this move will reinvigorate the U.S. financial landscape, though critics warn of potential misuse and fraud.
Despite passing the lower chamber, President Joe Biden has hinted at a possible veto. The administration’s objections highlight potential conflicts should the new legislation contradict their overall agenda.
H.J. Res 109 targets the SEC’s Special Accounting Bulletin 121 (SAB 121), allowing banks to include customers’ digital currency assets in financial statements, a provision not extended to traditional assets. The resolution suggests lawmakers’ efforts to maintain stability in the face of rapid advances in digital currencies.
Bill’s sponsor, GOP Representative Mike Flood, argued that SAB 121 discriminates against financial companies wishing to include digital currency in their portfolio.
Bill propelling banks into cryptocurrency sector
Supporters contend that such assets should always be regarded as “off-balance sheet,” leveling the competitive playing field.
SAB 121 was introduced by the SEC in March 2022, barring banks from handling digital currency assets for clients. Critics, including SEC Commissioner Hester Peirce, believe the ruling unfairly targets crypto assets. The SEC, however, cites protection of investors from unpredictable crypto volatility.
Predictions outline a potential stifling of U.S. cryptocurrency growth due to the rule, pushing businesses and individuals towards less regulated overseas markets. Leading banks and fintech companies have begun lobbying for revision or repeal of the regulation.
According to the House Financial Services Committee, repealing SAB 121 would be a pro-consumer action. The committee’s Chairman, Representative Patrick McHenry, has decried SAB 121 as overreaching. He suggests its repeal would enhance digital asset management and promote operational transparency.
