SAB 121 veto – Friday
Late Friday, President Joe Biden tried to quietly veto the Congressional Review Act resolution rescinding the Securitiess and Exchange Commission’s (SEC) rule barring traditional finance firms from providing crypto custody solutions to its customers – a.k.a. Staff Accounting Bulletin 121 (SAB 121).
The President’s reasoning, according to the short veto memo, was two-fold – undercutting the SEC and consumer protections:
“This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices. My Administration will not support measures that jeopardize the well-being of consumers and investors.”
what you should know: Nothing like a Friday release. Surely, no one will notice?
SAB 121 veto – duplicate
Notably, the President’s sentence in the veto offering an olive branch to Congress for creating a digital assets regulatory framework was nearly identical to the one he used when encouraging a vote against the digital asset market structure bill (FIT 21).
On Friday (May 31), the President said:
“My Administration is eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, which will promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system.”
On May 22, in regards to FIT 21, the President said:
“The Administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, which will promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system.”
what you should know: In spite of the sudden burst of “pro-crypto” bipartisan momentum of Congress signified by the passage of FIT 21 in the House and the SAB 121 CRA resolution in the Senate/House, the SAB 121 veto was never going to change. There is a sense of commitment by the President, at this point, to an anti-digital assets stance.
Also, for the President to have possibly accepted the terms of the resolution would have put SEC Chair Gary Gensler in a tenuous position. Perhaps that was another part of this decision. Either way, it seems possible that the President isn’t done here.
For example, could Chair Gensler still pull SAB 121 back? Better to let the Chair do it, then undercut him from the White House?
Or, is there really no concern for the voter who seeks a digital assets regulatory framework and could sway the election in November?
SAB 121 veto – reaction
As expected, pro-digital assets, Republican members of Congress voiced on X their displeasure with President Biden’s veto of SAB 121 including:
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- Senator Cynthia Lummis (R, WY)
- House Financial Services (HFS) Chair Patrick McHenry (R, NC)
- HFS Digital Assets Subcommittee Chair French Hill (R, AR)
- And, HFS Committee member and CRA resolution sponsor in the House Rep. Mike Flood (R, NE) remained defiant, “While President Biden’s veto is disappointing, it isn’t the last word on SAB 121. Digital assets and cryptocurrency are here to stay and are a critical part of America’s financial future.”
Pro-digital asset Democrats were reluctant to criticize the President right after the news, but given the position many have taken (Reps. Wiley Nickel (D, NC), Ritchie Torres (D, NY), Josh Gottheimer (D, NJ), and others.) – at the very least – muted criticism should be expected in the days ahead.
Senator Wyden
On Friday, Democratic Senator Ron Wyden (D, OR), who is Chair of Senate Finance, told an audience at CoinDesk’s Consensus conference that although the digital asset market structure bill (FIT 21) is running out of time in the 118th Congress, it’s a step in the right direction.
CoinDesk’s Jesse Hamilton quotes the Senator: “I think Chairman McHenry is right to establish a kind of regulatory framework and put a sharper focus on fighting fraud and rip-off artists.”
Sen. Wyden also reiterated his support for the SAB 121 resolution (before the President shot it down later in the day) as well as speaking favorably about new stablecoin regulation and blockchain tech, in general. Read more.
what you should know: Sen. Wyden is part of a (growing?) wave of Senate Democrats who are bucking the trend of the Democratic Biden Administration which has positioned itself as “anti-crypto” ahead of the general election in November.
SAB 121 veto – TradFi
In a letter dated Friday – just before the President’s veto – traditional finance associations told President Biden they wanted a piece of the crypto world and asked the President to sign the resolution rescinding SAB 121 as Congress has already agreed to.
From the letter: “The American Bankers Association, Bank Policy Institute, Financial Services Forum, and Securities Industry and Financial Markets Association (Associations) write to express our support for H.J. Res. 109, the Congressional Review Act resolution of disapproval for the Securities and Exchange Commission’s (SEC) “Staff Accounting Bulletin 121.”
what you should know: The veto was a perplexing move by the Biden Administration if you’re TradFi.
TradFi: “Aren’t we the best place for custody? If anybody can keep it safe, we can.”
This Wednesday’s hearing
On Friday, Politico’s Zach Warmbrodt noted on X that the House Financial Services (HFS) Committee had posted a list of witnesses for Wednesday’s HFS hearing – “Next Generation Infrastructure: How Tokenization of Real-World Assets (RWA) Will Facilitate Efficient Markets.” And, in addition to witnesses, there is new “study” legislation for the CFTC and SEC related to tokenization.
See the House Committee Repository page for the HFS Subcommittee on Digital Assets, Financial Technology and Inclusion.
Witnesses include:
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- Carlos Domingo, CEO, Securitize
- Nadine Chakar, Global Head of Digital Assets, Depository Trust and Clearing Corporation
- Robert Morgan, CEO, USDF Consortium
- Lilya Tessler, counsel, Sidley Austin
- Hilary Allen, professor, American University
The HFS Committee memorandum is here. and provides a background and use cases on tokenization as well as a summary on two bills to be considered.
what you should know: Hilary Allen remains an oft-used witness and resource by a Democratic leadership wishing to maintain a hardline on digital assets. Does Allen’s tone change here? Some of the nation’s largest financial firms are already moving in the RWA space and it would seem they will represented by proxies Securitize and DTCC.
stablecoins and NatSec
NFX general partner Morgan Beller published an op-ed this month on her venture firm’s website titled, “Stablecoins Are Defense Tech.” Beller argues that the best way to defend the “shield” of the American Dollar is to digitize it through stablecoins.
She writes, “It has always confounded me that there are still US regulators that don’t see safe and secure stablecoin projects as our (benign) trojan horses for continued dominance of the US dollar. If you want to proliferate your currency through many stable assets, across many secure exchanges, what better option do you have than a stablecoin?” Read it.
blockchain Senator
Rep. Lisa Blunt Rochester (D, DE), who co-sponsored Rep. Larry Buschon’s (R, IN) blockchain bills – “Deploying American Blockchains Act [H.R. 6572]” and “Promoting Resilient Supply Chains Act [H.R. 6571]” – is a “massive favorite” to with the Senate seat being vacated by retiring Sen. Tom Carper (D, DE) according to Punchbowl News. The National Education Association and the Delaware State Education Association are the latest groups to endorse Blunt Rochester. Read it here.
what you should know: According to a source, House Financial Services Ranking Member Maxine Waters (D, CA) urged her caucus’ membership to vote against Blunt-Rochester’s “Deploying American Blockchains Act” bill claiming jurisdictional issues with the bill. Though a contingent of Democrats voted “no,” the bill passed easily 334-79 in mid-May. (A group of Republican Freedom Caucus members also voted “no” for unrelated reasons.)
decentralizing Democracy
Cap Hill Crypto’s George Leonardo interviews Lyudmyla Kozlovska, founder of the Open Dialogue Foundation, which aims to bring together a point-of-view at the nexus of human rights, crypto, and policy.
Kozlovska discusses the policy future as it relates to Democratic principles: “Democracies should not follow the regulatory fashion of authoritarian regimes, but instead set trends for decentralization, create new tools to protect human rights, including privacy, in an era where the main war is over data.” Read more of her thoughts on Cap Hill Crypto.
still more tips:
Crypto ‘re-staking’ platforms boom as traders chase bigger returns – Reuters
Crypto Fans Embrace Their Political Moment at Annual Conference – The Wall Street Journal
48 billion yen in bitcoin cryptocurrency disappears from Japan exchange – Kyodo News
Tether Acquires $100 Million Stake in US-Listed Bitcoin Miner Bitdeer With Chinese Ties – Bloomberg