Congress Urges President To Support SAB 121 Resolution; Storm Swirls For Dem Leadership

letter – no veto, please

WIth the deadline approaching early next week, Senator Cynthia Lummis (R, WY) and a bipartisan group of Congressmen appealed directly to President Joe Biden with a Congressional letter urging him to NOT veto H.J.R.109. The resolution rescinds the SEC’s Staff Accounting Bulletin 121 and was passed by a bipartisan majority in both houses (1, 2) of Congress this month.

Sen. Lummis and the House reps say in a statement, “Given the overwhelming bipartisan votes, we urge you to sign H.J. Res. 109 into law or work with the SEC to rescind the staff guidance…. Rescinding SAB 121 is well within the SEC’s authority and there is ample precedent for revisiting a staff accounting bulletin. In fact, most staff accounting bulletins over the last three decades have been revisions and recessions of prior guidance.” Read the release.

Lummis is joined by House Majority Whip Tom Emmer (R, MN), House Financial Services (HFS) Chair Patrick McHenry (R, NC) and Reps. French Hill (R, AR), Wiley Nickel (D, NC), Ritchie Torres (D, NY), Andy Barr (R, KY), Mike Flood (R, NE) and Dan Meuser (R, PA).

And, read the letter (PDF).

what you should know: If President Biden signs H.J.R.109 into law, would SEC Chair Gary Gensler decide to leave? The President’s signature would be a damning statement on Gensler’s leadership at the agency – even if was just following orders from Dem leaders. It would also follow the ouster of Chair Gensler’s policy director Heather Slavkin Corzo on May 17. The announcement came one day after the SAB 121 resolution vote in the Senate and was one of the first signs that Dem leaders were potentially changing their collective mind on digital assets.

storm for Dem leadership

Ohhhhh, the storm continues to brew for Democratic leadership…

According to Bloomberg yesterday, former President Donald Trump and Elon Musk “are discussing cryptocurrency policy as the former president increasingly highlights Bitcoin and other digital assets on the campaign trail as a way to reach new voters,” says an unnamed source. Read it.

About 30 minutes after the story published, Elon Musk tweeted, “Pretty sure I’ve never discussed crypto with Trump, although I am generally in favor of things that shift power from government to the people, which crypto can do.” Too late – the damage had been done. Dem fears had been stoked further.

Another unnamed source told The Block in a widely (wildly?) repeated story on Wednesday, “President Joe Biden’s re-election campaign has begun reaching out to crypto industry players over the past two weeks for guidance on ‘crypto community and policy.'” Read that one.

more tips:

    • Trump’s head-spinning turnabout on cryptocurrency – Axios

what you should know: The media is now running with a narrative that the Biden Administration is reactively trying to reach the crypto crowd which Trump has proactively embraced (in the last month). How former President Trump’s conviction yesterday plays into this remains to be seen.

new Dem leader: Nickel

Democratic Rep. Wiley Nickel (NC) is not backing away from his leadership role in the 118th Congress among Democrats who support creation of a regulatory framework for digital assets.

Yesterday, in a 15-minute Spaces broadcast on X and hosted by Crypto Council for Innovation CEO Sheila Warren, Rep. Nickel defended fellow Dems saying in part: “I think Democrats have been very engaged in this process for this whole Congress. But, the public perception has been folks hearing a lot from Senators like Elizabeth Warren (D, MA) and [SEC Chair] Gary Gensler and using that as a way to paint with a very broad brush all Democrats.”

Nickel continued, “And we don’t all agree with Gary Gensler and his approach at the SEC. And a lot of other people in the Biden Administration feel very differently. The regulators feel differently. This vote (FIT 21) we had was a chance to really drive that message home that this is a bipartisan issue and that there are a ton of Democrats who support web3 and want make sure we protect consumers by putting in sensible regulation…” Listen to the Spaces.

For Nickel to make a comment about the “other people” in Biden Administration is telling. The White House needs Rep. Nickel as the November general election approaches if it’s going to earn digital asset voters support.

what you should know: The Congressman’s profile is being raised within the Democratic Party due to his position on digital assets. This will be helpful as he prepares to retire at the end of this Congress and run for the Senate in 2026. In a February interview with blockchain tipsheet, Rep. Nickel explained his position on digital assets -and his exit this Congress citing “gerrymandering.” Read that one.

tradfi and blockchain

Speaking on a panel at yesterday’s Consensus conference, Franklin Templeton President and CEO Jenny Johnson was crystal clear about the future for her company saying, “We have looked at blockchain tech [and found] this is going to be transformational and we better make sure we understand it.” Johnson pointed to the use case of settlement and the blockchain as a single source of truth that will drive huge efficiency. Read more on CoinDesk.

more tips:

    • Firms that handle $10tn a day in trades just dove into the tokenisation game – DL News

what you should know: Johnson noted her company’s forays into tokenization – among the first movers in traditional finance in that area. Next Wednesday’s House Financial Services (HFS) Digital Assets Subcommittee hearing on tokenization ought to be of interest.

CFTC Johnson as FDIC Chair

Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson (D) is being floated as one of two possible replacements for FDIC Chair Martin Gruenberg, who  is embroiled in the agency’s sexual harassment scandal.

Reporting on Johnson’s candidacy, Wall Street Journal adds, “The White House is also looking for someone who wasn’t part of the agency’s leadership structure in recent years.” Read more. Johnson has also been mentioned for a role in Treasury which was supported by Ranking Member Maxine Waters (D, CA).

what you should know: Commissioner Johnson has generally been viewed by industry as a pro-crypto Commissioner and has made the case for how crypto can help with inclusion of underrepresented communities and closing the wealth gap (see 2022 CFTC webcast).  Going from Gruenberg (who was rumored to have lead the Chokepoint 2.0 charge against crypto) to Commissioner Johnson would seem be an enormous change policy-wise.

new sandbox proposal

Speaking to industry’s desire for more flexibility when it comes to government policy and innovation, Securities and Exchange Commission (SEC) Commissioner Hester Peirce responded positively and publicly to a new proposal from the Bank of England and Financial Conduct Authority (FCA – the UK’s SEC).

In Commissioner Peirce’s comment, she suggests, “The proposed cross-border sandbox would allow firms to conduct the same sandbox activities under the same regulatory requirements in both the United Kingdom and the United States. I suggest that, contrary to the proposal, the DSS be open to US-domiciled firms. Together with a Commission-enacted micro-innovation sandbox and an information sharing agreement between our two jurisdictions, the expanded eligibility would foster cross-border innovation.”

Commissioner Peirce gives a shout out to House Financial Services Chair Patrick McHenry’s “Financial Services Innovation Act,” [H.R.7440] which also aims at providing a sandbox to companies looking to create innovative financial products. A February press release on 7440 is here.


    • Commissioner Peirce’s comment –
    • Digital Securities Sandbox joint Bank of England and FCA consultation paper –

what you should know: The sandbox “idea” is not new to Commissioner Peirce, a Republican. In 2021, she proposed the “Token Safe Harbor Proposal 2.0” providing “network developers with a three-year grace period within which, under certain conditions, they can facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws.” As a minority Republican on the Commission, Peirce’s proposal went nowhere given the anti-crypto posturing of the Commission at the time. But, industry noticed and continues to throw around her name as the next SEC Chair if Republicans take charge in the Executive Branch.

state wants support disclosures

New York Department of Financial Services (NYDFS) Superintendent Adrienne Harris announced new guidance yesterday regarding customer service in the digital asset ecosystem.

According to an NYDFS press release, “The guidance requires VCEs to collect relevant data so that the Department can assess whether they are resolving customer service requests and complaints in a timely and fair manner.” Read more.

what you should know: This is like the “stuck on a tarmac for hours” rule for airlines, but for digital assets. Crypto companies such as Coinbase have been known to be lax in their response to customers during peak times of crypto trading interest.

debate: bipartisan v. partisan

“Crypto debate between [Marvin Ammori of Uniswap] for Team Blue vs
[Ryan Selkis] for Team Red. Ammori calls for crypto to be bipartisan, Selkis says Trump or die…” – Read more on the debate from Fortune’s Jeff John Roberts on X

SEC podcast

Former SEC Regional Director Marc Fagel provides a measured, contrarian take on digital assets regulation and his former agency’s enforcement approach on Tony Edward’s Thinking Crypto podcast. Fagel is largely supportive of the SEC’s strategy to-date on crypto. His line of thinking may trigger some of the podcast’s pro-crypto audience.

Hear it on Apple Podcasts.

still more tips

A16z backs crypto super PACs with $25M donation – Blockworks

Coinbase and Haun Ventures invest $11 million in Neynar, a toolbox for Web3 social networks – Fortune on Yahoo

Terraform, Do Kwon to reach fraud settlement with SEC – Cointelegraph

Crypto regulatory affairs: Turkey makes progress towards regulatory framework for crypto – Elliptic