Lawmakers Seek to Skirt Biden’s Anti-Crypto Veto, Tighten SEC’s Purse

By André Beganski

U.S. House lawmakers are set to debate legislation Wednesday that would restrict the Securities and Exchange Commission’s (SEC) ability to carry out a controversial crypto accounting rule.

The bill from the House Committee on Appropriations outlines funding for government agencies through September 2025, and for Wall Street’s top regulator, it comes with several strings attached. 

While slashing the SEC’s annual budget by nearly $145 million, the bill also prohibits the SEC from implementing or enforcing Staff Accounting Bulletin (SAB) 121. The rule introduced and enacted last year requires companies custodying customers’ crypto to treat digital assets as liabilities, and hold “corresponding assets” on their balance sheets against them.

Lawmakers in the House and Senate recently passed a bill erasing the SEC’s rule—with votes in both chambers of Congress drawing bipartisan support. However, the measure was later vetoed by President Joe Biden, as his administration had promised to do.

Though advocates of overturning SAB 121 would need a two-thirds majority in the House and Senate to override Biden’s veto, the spending bill debated Wednesday provides an alternative means for Republican-led efforts to rein in the SEC. However, the bill would be subject to markup in the Democrat-controlled Senate on its way to eventually becoming law.

A summary of the bill published by the Committee—which is chaired by Rep. Tom Cole (R-OK)—claimed SAB 121 “implements harmful digital asset requirements.” Lawmakers have previously described SAB 121 as an overstep of the SEC’s regulatory authority.

“It provides sensible cuts to federal financial and consumer protection agencies and prohibits funding for their overreaching, harmful, regulatory policies,” Cole said of the bill in prepared remarks.

At the same time, the bill debated Wednesday restricts the SEC’s ability to carry out enforcement actions related to “digital asset transactions,” except for instances of fraud and market manipulation. Until the SEC clarifies which digital assets are securities under existing law, or it’s granted new authorities, the bill prohibits the SEC from policing crypto broadly.

To temper the “aggressive” nature of the SEC’s Enforcement Division, the bill’s summary states that its funding would be limited to $644 million in the government’s coming fiscal year. The figure represents a $168 million decrease compared to a request from the Biden administration.

The SEC requested $2.6 billion in March, citing its oversight of around 40,000 entities in a report. Describing the digital assets industry as a space “rife with noncompliance,” the agency asked for more resources to address “critical and evolving risks” associated with the industry.

Providing the SEC with $2 billion, the spending bill’s allocation comes in nearly $590 million below that request. On top of that, the proposed appropriation falls below the nearly $2.2 billion the SEC was allocated for regulating markets in the government’s current fiscal year.

Edited by Andrew Hayward

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