Senate Affirms Banks’ Security of Cryptocurrency, Yet Biden’s Veto Lurks
The Senate has made a surprising move in the world of cryptocurrency by passing a bill, H.J. Res. 109, with bipartisan support. This bill aims to overturn the SEC’s Staff Accounting Bulletin (SAB) No. 121, which restricts financial institutions from acting as custodians for digital assets like Bitcoin. However, there is a twist: President Biden might veto the bill due to concerns about investor protection.
H.J. Res. 109 seeks to remove what supporters see as unnecessary barriers, allowing regulated financial firms to offer cryptocurrency custody services. The bill received broad bipartisan support in the House and was approved by the Senate with a 60 to 38 vote.
However, the White House has expressed opposition to the legislation. In a recent statement, the administration threatened to veto the bill, citing concerns about disrupting the SEC’s work to protect investors in crypto-asset markets and safeguard the broader financial system.
Senator Elizabeth Warren has been a vocal opponent of the bill, emphasizing the unique risks associated with cryptocurrencies, such as hacking and fraud. She cited incidents involving Binance and FTX as examples.
Proponents of H.J. Res. 109 argue that removing SAB 121 is essential for consumer protection in the U.S. They believe that the current custody practices contribute to centralization risks, with a few institutions holding most of the Bitcoins.
Senator Cynthia Lummis, a major supporter of the bill, criticized SAB 121 for being imposed without proper procedure. She argued that overturning the rule would allow more regulated institutions to hold Bitcoin on behalf of customers. Critics, on the other hand, believe that these institutions are well-equipped to manage digital asset custody due to their compliance frameworks and security protocols.
President Biden has already indicated his intention to veto H.J. Res. 109. With Senator Warren’s opposition and alignment with SEC Chair Gary Gensler, it is likely that Biden will follow through with his veto.
If the veto occurs, the bill’s progress will be halted, maintaining the current restrictions on financial institutions’ custody of digital assets. There is also a possibility of a “pocket veto” if Congress adjourns during the 10-day period, preventing the bill from becoming law without an explicit veto.
As the debate continues, the future of cryptocurrency custody regulations hangs in the balance, awaiting the President’s decision.