May 16, 2024 - Economy

Senate votes to kill SEC crypto accounting rule

Photo illustration of Gary Gensler in front of a calendar page with drawn circles and X's.

Photo illustration: Shoshana Gordon/Axios. Photo: Win McNamee/Getty Images

A resolution condemning a rule on how to account for cryptocurrency assets has been passed by both houses of the U.S. Congress, setting up a likely veto by the White House.

Why it matters: The crypto industry began its fight against chairman Gary Gensler's SEC in the courts, but has successfully extended it onto a new field: the legislature.

The latest: In a 60-38 vote in the Senate, legislation striking down the Securities and Exchange Commission's staff accounting bulletin 121, which makes it very expensive for financial institutions to participate in the crypto custody business, has passed.

  • This follows passage by the House.
  • The White House has indicated it would veto any such legislation.

The big picture: The SEC had been feeling more confident after a procedural win on most points in its case against Coinbase, the country's largest cryptocurrency exchange, and on key points in the case against Terraform Labs.

  • However, that follows a string of major losses, such as on the characterization of the cryptocurrency XRP and approval of a spot bitcoin ETF.
  • Today, the full Congress finalized a rebuke of the agency's creation of the rule commonly known as SAB 121.

In response to a request for a comment on the vote, SEC staff sent Axios a description of SAB 121 without commenting on the legislative action.

What they're saying: "The SEC should never set policy—over banks, no less, an industry they do not regulate—through a staff accounting bulletin. This is nothing more than this administration attempting to skirt the law," Sen. Cynthia Lummis (R., Wyo.) said in a statement.

The other side: Sen. Elizabeth Warren took to the Senate floor today to object to the vote itself, calling it an inappropriate use of the Congressional Review Act (CRA).

  • "Today's vote, coming more than two years after the SEC wrote the bulletin, and applying to a staff bulletin rather than a rule, is far outside the scope of the CRA. We should not be holding this vote," she said.
  • However the U.S. Government Accountability Office had already ruled the bulletin a rule for purposes of the CRA.

What's next: The president will weigh in (and his office has already said what he will do).

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