Senate Passes Bill to Overturn SEC Rule on Bitcoin And Crypto Custody, Biden Threatens Veto

Moments ago, the Senate passed legislation H.J.Res. 109 that would overturn the SEC’s Staff Accounting Bulletin (SAB) No. 121, preventing highly regulated financial firms from custodying Bitcoin and other cryptocurrencies. The legislation passed with a vote of 60 to 38, demonstrating bipartisan support for the measure.

BREAKING: 🇺🇸 Legislation that would overturn SEC rule preventing highly regulated financial firms from custodying #Bitcoin and crypto PASSES the Senate. pic.twitter.com/GDyJRCMCxy

— Bitcoin Magazine (@BitcoinMagazine) May 16, 2024

The resolution, which had already passed the House last week, aims to dismantle SAB 121. This bulletin imposes stringent restrictions on financial institutions, effectively barring them from acting as custodians for digital assets such as Bitcoin. Under the Congressional Review Act, H.J.Res. 109 seeks to remove these roadblocks, thereby enabling highly regulated financial firms to offer custody services for Bitcoin and other cryptocurrencies.

Though, the White House has made its stance clear regarding this legislation. A recent statement emphasized that if the bill reaches President Biden’s desk, he will veto it. The administration argues that overturning SAB 121 would “disrupt the SEC’s work to protect investors in crypto-asset markets and to safeguard the broader financial system.”

Proponents of H.J.Res. 109, however, argue that overturning SAB 121 is crucial for protecting consumers in the United States. Much of this stems from the batch of spot Bitcoin Exchange Traded Funds (ETFs) approved for trading by the SEC earlier this year. The majority of these bitcoins are being held on behalf of a few institutions, which poses centralization risks. H.J.Res. 109 seeks to remove barriers to allow more highly regulated institutions to take custody and hold bitcoin on behalf of customers, helping to ease any centralization concerns. 

Critics of the SEC’s SAB 121 argue that the rule is overly restrictive and hampers the ability of financial institutions to meet the growing demand for Bitcoin services. They believe that regulated institutions are well-equipped to handle the risks associated with digital asset custody, given their existing compliance frameworks and security protocols.

Senator Cynthia Lummis, a vocal advocate for Bitcoin, urged her support for overturning SAB 121 earlier today, emphasizing, “SAB 21 is a rule under the administrative procedure act, disguised as an accounting guidance. It was published by the SEC staff without the approval of the majority of the commission.”

JUST IN: 🇺🇸 US Senator Cynthia Lummis urges the Senate to vote YES on legislation that would allow highly regulated financial firms to custody #Bitcoin and crypto.

She also stated “The safest place for digital assets is in a self hosted wallet.” 👏 pic.twitter.com/5WnGHZSNP3

— Bitcoin Magazine (@BitcoinMagazine) May 16, 2024

Senator Elizabeth Warren, however, urged the Senate to align with Joe Biden by voting no, stating that this is an entirely different asset class than what banks and other regulated financial institutions are used to. She said digital assets are not something physical that banks can hold in a vault and is completely online, therefore it is something that can be hacked, and cited the hacks of crypto exchanges Binance and FTX as her evidence.

JUST IN: 🇺🇸 US Senator Elizabeth Warren urges the Senate to vote NO on legislation that would allow highly regulated financial firms to custody #Bitcoin and crypto. pic.twitter.com/L6NwEVUseN

— Bitcoin Magazine (@BitcoinMagazine) May 16, 2024

Despite the Senate’s approval, the future of H.J.Res. 109 remains uncertain due to the threatened presidential veto. If President Biden follows through with his promise, it would halt the progress of the resolution, maintaining the status quo regarding the custody of digital assets by financial institutions. Biden has the options to sign the bill into law, veto it, or do nothing. If he chooses to do nothing, then the bill goes into law without his signature.

Fox Business journalist Eleanor Terrett commented on the news, stating, “The Senate has voted to overturn SAB 121 which, as we all know, means this now heads to the President who said last week he plans to veto it. If so, then it’s back to square one with the House & Senate which would need a 2/3 majority vote in both chambers to override the veto.”

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