The council voted to reject the SEC’s anti-crypto banking directive SAB 121

The United States House of Representatives has voted to pass a bill that would overturn a controversial Securities and Exchange Commission directive barring banks from owning crypto.

President Joe Biden, however, has previously warned that he will oppose the new bill if it comes to his desk.

On May 8, the House voted to approve the SEC's special accounting statement (SAB 121) that repeals dual accounting – which is not for traditional assets such as securities.

Republican Congressman Mike Flood – the lawmaker who introduced the decision – said SAB 121 is unfair to banks that want to hold crypto, because the security assets are always considered off-balance sheet.

Notably, 21 Democrats supported the bill — along with 207 votes from Republicans — and the bill passed 228 votes to 182.

Although the bill passed the House of Representatives, President Joe Biden said he would veto the new bill.

In a May 8 statement, the White House said it “strongly opposes” House members' overturning of SAB 121, saying it would undermine the SEC's efforts to “protect investors in crypto-asset markets and protect the broader financial system.”

Limiting the SEC's ability to provide a comprehensive and effective financial regulatory framework for crypto-assets will lead to greater financial instability and market instability.

Introduced by the SEC in March 2022, SAB 121 outlines the regulator's accounting guidelines for institutions seeking to hold crypto assets. Specifically, SAB 121 prohibits banks from holding crypto assets on behalf of clients.

US lawmakers, including SEC Commissioner Hester Pearce, have argued that SAB 121 threatens the ability of regulated banks to act as crypto custodians and treats crypto holdings differently from other assets.

“By overturning SAB 121, the bipartisan decision ensures that consumers are protected by removing barriers that prevent highly regulated financial institutions and companies from acting as custodians of digital assets,” the House Financial Services Committee (HSFC) wrote in a May 8 statement.

“Staff Accounting Bulletin 121 is one of the most glaring examples of regulatory oversight that has defined Gary Gensler's tenure at the SEC,” said HSFC Chairman Patrick McHenry.

This is a developing story, and more information will be added as it becomes available.

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