The Stablecoin Act gives Congress the option to override Biden’s veto of SAB 121

The political cost to Congress of overriding President Joe Biden's veto of HJRes.109 could be very high.

Congress recently voted to approve HJRes.109, which repeals non-bipartisan support for the US Securities and Exchange Commission's (SECs) Staff Bill No. 121 (SAB 121).

SAB 121 requires banks to record customer crypto assets as liabilities on their balance sheets, a practice unique to digital assets. Removing this requirement will make it easier for banks to do business with the crypto industry.

A unique show of bipartisan support passed the resolution in the Senate by a vote of 60 to 38.

Despite the support of the resolution in Congress, Biden has rejected the repeal, saying he does not support measures that “endanger the safety of consumers and investors.”

Christine Smith, CEO of the Blockchain Association on X, said Biden may be “swimming with the tide of public opinion and growing consensus in Congress.”

If support is so strong, what options do Congress and the crypto industry have?

Congress has the vote to override Biden's veto.

Despite Biden's veto challenge, both houses of Congress need a two-thirds vote to override it.

The House of Representatives needs 290 votes to override the veto, while the Senate needs 66. The House has 218 Republicans and 213 Democrats, while the Senate has 49 Republicans, 47 Democrats and four independent senators.

Despite the crypto-friendly trend in the Republican Party – with former president and current presidential candidate Donald Trump recently becoming a supporter of the crypto industry – he still needs to sway more Democrats to override the veto.

But crypto doesn't seem as divisive or polarizing as other issues.

Republican Sen. Cynthia Lammis said on a recent Unchained podcast that the main reason they were able to muster bipartisan support to repeal SAB 121 was not because of political success, but because it “just didn't go through the proper process.”

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Binary votes weren't just votes for or against crypto, but against non-standardization.

Loomis acknowledged that it would be difficult to pass legislation in an evenly divided House and Senate, but said the “good news” is that digital assets are “not a partisan issue.”

On May 22, 2024, the US House passed the first digital asset legislation in US history – the Financial Innovation and Technology for the 21st Century (FIT21) Act. He did so with strong bipartisan support, rallying 208 Republicans to 71 Democrats to pass the bill by a two-to-one margin.

Congress has also overridden presidential vetoes in the past, with Donald Trump and Barack Obama both having their vetoes rejected.

However, Congress may have more sensible options.

Stablecoin offers an action option

The cryptocurrency industry has recently gained widespread support among US lawmakers. The recent bipartisan votes for HJRes 209 and FIT21 were historic moments for the crypto community.

Some observers say shaky support for the industry between lawmakers and the upcoming presidential election means representatives are unlikely to strike over a veto.

Daniel McBee, former crypto attorney and CEO of digital payments company Flex, told Cointelegraph that “there's no realistic chance that Congress will override Biden's impromptu veto in an election year. Congressional Democrats don't want to risk an election on this issue.”

A head-on dispute with a Democratic leader months before a federal election may not be the best move.

However, McCabe said, “Democrats still have a chance to pass the Lummis-Gillibrand Payment Stablecoin Act, without having to override the veto that kills SAB 121.”

The Lummis-Gillibrand Payment Stablecoin Act was introduced on April 17, 2024 and provides a regulatory framework for stablecoins.

It also stipulates that crypto assets held in custody by financial institutions should not be treated as assets or liabilities on their balance sheets, which is in direct conflict with SAB 121.

Co-founder of blockchain development firm COZ, Tyler Adams, who has previous lobbying experience in Washington, DC, told Cointelegraph that this could be a strategic option for Democrats, as they are “trying to walk a fine line on legislative issues. Chairs and Presidents.

Pro-crypto lobbies to action

Lummis said some factions in both parties are still ideologically opposed to passing favorable crypto regulation.

She described how there are politicians in the progressive wing of the Democratic Party who are “uncomfortable with assets that the government doesn't control.” There is a similar concern among libertarian conservatives who “struggle with the same mentality” of facilitating what they see as an unknown competitor to the US dollar.

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The crypto industry is lobbying hard to change this. Days after the veto, on June 3, 2024, Coinbase donated $25 million to FairShack, a federal crypto-focused super political action committee (PAC) for crypto-friendly candidates.

The banking lobby is also getting involved. “The proposal to reverse SAB 121 is known to be backed by the big banking and digital asset sectors,” McCabe highlighted. He believes that “the pro-crypto lobbies and the banking industry can have full influence.”

Banking and pro-crypto lobbies have two options to avoid SAB 121: advocate for the smooth passage of the Lummis-Gillibrand Payment Stablecoin Act or persuade lawmakers to pressure the SEC to enact SAB 121.

Both options are likely to please Democrats as they do not directly affect Biden's candidacy and pose the threat of a political hot potato during the US election.