Does Joe Biden pass strict crypto rules from the SEC?

In the US, there are political squabbles over crypto-regulation by the SEC. Republicans are demanding rejection, Joe Biden is pushing for approval, vetoed if necessary.

The U.S. House of Representatives on May 8 approved a resolution to reject the Securities and Exchange Commission's (SEC) accounting guidelines for cryptocurrencies. According to the industry, these guidelines discourage banks from serving crypto customers.

The SEC's so-called Staff Accounting Bulletin No. 121 (SAB 121) is supposed to clarify the accounting treatment of crypto assets. Banks would be instructed to hold crypto assets for customers themselves. This could lead to significant capital costs and "make digital assets less secure," said Republican Riley Nickel at a hearing.

SAB 121 was originally introduced as a guideline for employees. An audit by the Government Accountability Office (GAO) however, revealed that the SEC should have submitted the rule to Congress earlier for approval. Therefore, SAB 121 would be "illegal" anyway, Republican lawmakers said.

"Gary Gensler, in his jihad against digital assets, has used a seemingly trivial personnel records directive to effectively prevent large publicly traded banks from taking custody of digital assets," declared Republican Mike Flood opposite CoinDesk.

With possible veto: Joe Biden moves to thwart

Gensler and the SEC get support from the Oval Office: "SAB 121 was issued in response to demonstrated technological, legal and regulatory risks that have caused significant losses to consumers," President Biden said in a statement of May 8.

The White House is "determined" not to disrupt the SEC's work on this issue. It intends to block the House resolution with a veto if necessary. However, under the U.S. Constitution, the House can still override the president's veto with a two-thirds majority.

For Republican Patrick McHenry is SAB 121 "a huge departure from the way highly regulated banks have traditionally been required to handle assets on behalf of their customers."

Crypto industry versus SEC

With SAB 121, the SEC is not taking its first shot at the crypto industry. According to Gary Gensler, crypto platforms often do not meet the standards applicable to regulated securities exchanges.

With a recent lawsuit by Consensys however, the industry knows how to fight back. More to the point, according to McHenry, Gensler told Congress during a hearing "deliberately misled".