US House of Representatives to Vote on Controversial Bulletin for Crypto Companies Next Week

The House of Representatives is set to vote on President Joe Biden's veto of Statement of Accounting Bulletin 121 (SAB 121), a decision that has sparked significant controversy.

The bulletin itself has sparked significant debate over the past year due to concerns in the crypto industry that it could prevent banks from effectively protecting their digital assets. Under the document, companies that hold cryptocurrencies must record customers’ crypto liabilities as liabilities on their balance sheets.

According to House Majority Leader Steve Scalise’s weekly schedule, SAB 121 is on the list of “legislation that may be considered” and could be debated on Tuesday or Wednesday of next week. The rule requires SEC-reporting entities holding cryptocurrencies to include those holdings on their balance sheets.

The measure received a favorable vote of 228-182 in the House of Representatives in May, with support from mostly Republicans and 21 Democrats. A week later, the Senate voted 60-38, with several Democrats, including Senate Majority Leader Chuck Schumer, supporting the measure. However, a two-thirds majority vote of both the House and Senate would be needed to override Biden’s veto.

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Critics argue that SAB 121 could prevent US banks from effectively managing crypto exchange-traded products on a large scale, potentially leading to concentration risk by giving greater control to non-bank entities. Alexander Grieve, head of government affairs at venture capital firm Paradigm, noted that it’s a steep hill to climb, but not impossible given the bipartisan support the measure previously received.

Donald Verilli, former U.S. general counsel, said federal regulators have coordinated to limit the digital asset industry’s involvement in the banking sector. Verilli filed an amicus brief with the U.S. Tenth Circuit Court of Appeals in support of Custodia Bank’s appeal of the Federal Reserve’s refusal to grant the bank access to a master account. Several other parties, including former U.S. Senator Pat Toomey and Wyoming Secretary of State Chuck Gray, also filed briefs in support of Custodia’s appeal.

Alexander Stefanov