SAB 121 Joint Resolution Approved By Financial Services; New Amicus Brief For Kraken

HFS markup – SAB 121

At yesterday’s abbreviated House Financial Services markup (video is here), the Committee sent two digital asset-related bills to the House floor.

The House Joint resolution rescinding the Securities and Exchange Commission’s (SEC) controversial Staff Accounting Bulletin 121 (SAB 121) sponsored by Reps. Mike Flood (R, NE) and Wiley Nickel (D, NC) was approved by a final tally of 31-20… all Republicans and 3 Democrats (Rep. Nickel, Rep. Ritchie Torres (NY), Rep. Josh Gottheimer (NJ)) voted for the bill.

From the Majority press release:

    • H.J.Res.109, providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to “Staff Accounting Bulletin No. 121,” offered by Rep. Mike Flood (NE-01), overturns the SEC’s SAB 121. By overturning SAB 121, the Resolution will ensure consumers are protected by removing roadblocks that prevent highly regulated banks from acting as custodians of digital assets.”

Video of Rep. Flood’s hearing comments are here as he makes a detailed case for the bill with Members.

Jake Chervinsky, formerly of Blockchain Association and currently Chief Legal Officer of Variant Fund, was heartened by the “good news” of the bill’s passage out of committee but noted on X,  “Bad news: that’s likely the end of the story in Congress. Getting repeal done is nearly impossible. Lawsuit or bust.”

Chervinsky doesn’t see the bill taken up by the Democrat-controlled Senate or signed into law by the White House.

what you should know: It will be interesting to see the strategy employed in the Senate by the joint resolution’s sponsor Senator Cynthia Lummis (R, WY). Is there a sympathetic Democrat who can help? Perhaps. Senate Finance Chair Ron Wyden (D, OR) partnered on a Congressional letter regarding the SEC X account hack with Sen. Lummis in early January.

HFS markup – AML

Also considered by the Committee was a bipartisan digital assets bill targeting illicit finance and the use of digital assets. Like the others passed out of Committee – this time by a unanimous vote of 49-0.

Sponsored by Rep. Scott Fitzgerald (R, WI), the bill was helped by bipartisan support from Reps. Gregory Meeks (D, NY), Zach Nunn (R, IA), Madeleine Dean (D, PA), Mike Flood (R, NE) and Donald Davis (D, NC).

From the Majority press release:

    • H.R. 7156, the “Combating Money Laundering in Cyber Crime Act of 2024,” offered by Rep. Scott Fitzgerald (WI-05), strengthens the authorities of the United States Secret Service by closing a gap that limits their ability to investigate various crimes related to digital asset transactions and to counter transnational cyber-criminal activity.”

See video of Rep. Fitzgerald’s remarks as he made the case for the bill.

what you should know: Chair Patrick McHenry’s (R, NC) prioritization of the five bills was due to a scheduling conflict with a House floor vote for government funding and then a recess put forward by House Speaker Mike Johnson (R, LA). McHenry was visibly miffed (see the video clip) at the conflict with the Speaker even though it’s difficult to tell from the text of his opening statement. Read it here.

campaign finance

Dem Touted Her Pro-Crypto Stance—Then Big Crypto Sent Her Campaign to the Moon – The Daily Beast

amicus brief

DeFi Education Fund and Blockchain Association partnered on amicus brief filed yesterday in support of Kraken and the company’s motion to dismiss the case which has been brought by the SEC in November.

DeFi Education Fund’s Max Bernstein says of the brief, “At a high-level, our amicus brief primarily focuses on the various ways the SEC tries to categorize all digital assets as securities and why each of those ways is wrong. For instance, we start off by demonstrating to the Court why digital assets are not themselves investment contracts, then move to discuss why digital assets do not become investment contracts “whenever a buyer believes they will increase in value due to their creator’s efforts.”

See it here (PDF).

more tips:

    • The real story of the SEC’s suit against Kraken, and why Kraken is moving to dismiss the case (Feb. 22) – Kraken blog

still more tips

Speech of CFTC Commissioner Kristin Johnson: Building A Regulatory Framework for AI in Financial Markets –

U.S. Government Crypto Wallets Transfer Nearly $1B of Bitcoin Seized From Bitfinex Hacker – CoinDesk

Coinbase says services restored after outage affects trading accounts – Reuters