Stablecoin regulations face hurdles as President Biden’s veto of the SAB 121 repeal challenges bipartisan support in Congress. Can they override it?
H.J.Res. 109’s veto by President Joe Biden may be too costly politically for Congress to override.
With unexpected bipartisan support, Congress recently voted to approve H.J.Res.109, which would overturn the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121).
SAB 121, specific to digital assets, mandates that banks include customer crypto holdings as liabilities on their balance sheets. If this condition were removed, banking institutions would find doing business with the cryptocurrency sector simpler.
The resolution passed the Senate by a vote of 60 to 38, thanks to bipartisanship.
Despite Congress’s support for the resolution, Biden vetoed the repeal, claiming that “he will not support measures that jeopardize the well-being of consumers and investors.”
According to Kristin Smith, CEO of the Blockchain Association, Biden might be “swimming against the tide of public opinion and growing consensus in Congress” on X.
With such significant backing, what alternatives do Congress and the crypto sector have?
Congress can override Biden’s veto with enough votes.
Although Biden’s veto is challenging, it can be overridden by both chambers of Congress with a two-thirds majority.
The House of Representatives will require 290 votes to override the veto, and the Senate will need 66. There are 218 Republicans and 213 Democrats in the House, and 49 Republicans, 47 Democrats, and four independent senators make up the Senate.
Even though the Republican Party is becoming more pro-crypto, as evidenced by the recent public statements made by former President and current presidential contender Donald Trump, it will still need to win over a few Democrats to override the veto.
Crypto, however, isn’t as contentious or polarizing as other concerns.
Republican Senator Cynthia Lummis claimed on a recent Unchained podcast episode that the main reason she could garner bipartisan support to repeal SAB 121 was “just because it hadn’t gone through the proper procedure” rather than any political achievement.
The bipartisan votes were against deviating from the established protocols rather than just supporting or opposing cryptocurrency.
The “good news” is that digital assets are “not a partisan subject,” according to Lummis, who acknowledged that it is difficult to enact legislation that is nearly equally divided in a House and Senate.
The Financial Innovation and Technology for the 21st Century (FIT21) Act, the first piece of digital asset legislation in American history, was enacted by the House on May 22, 2024. It accomplished this with resounding bipartisan support, bringing together 208 Republicans and 71 Democrats to approve the Act by a two-to-one vote.
Congress has also overridden presidents’ vetoes in the past; vetoes from both Barack Obama and Donald Trump have been overridden.
Congress might have wiser choices.
The Stablecoin Act offers a substitute.
Only recently have U.S. officials begun to show more significant support for the bitcoin industry. For the cryptocurrency community, the most recent bipartisan vote on H.J.Res 209 and FIT21 was a historic occasion.
Some commentators predict that representatives won’t challenge a veto repeal because of lawmakers’ poor support for the industry and the impending presidential elections.
There is no “realistic chance of Congress overriding Biden’s ill-conceived veto during an election year,” according to Daniel McCabe, a former crypto lawyer and chief compliance officer of the digital payments company Flexa, who spoke with Cointelegraph. Democrats in Congress won’t want to put themselves in danger for election on this matter.
It might not be best to engage in a direct conflict with the Democratic leader months before a federal election.
However, according to McCabe, “Democrats still have the opportunity to pass the Lummis-Gillibrand Payment Stablecoin Act, which kills SAB 121 effectively without requiring a veto override.”
The April 17, 2024, introduction of the Lummis-Gillibrand Payment Stablecoin Act provides a legislative basis for stablecoins.
It further states—in direct opposition to SAB 121—that cryptocurrency assets held in custody by financial institutions should not be listed on their balance sheets as assets or liabilities.
Democrats may be taking this as a calculated move, according to Tyler Adams, co-founder of the blockchain development company COZ, who has prior experience lobbying in Washington, D.C., and told Cointelegraph that the party is “trying to walk a fine line on a topic that could cost them legislative seats and the presidency.”
Pro-crypto advocates call for action.
According to Lummis, some elements of both parties continue to hold ideological objections to enacting beneficial crypto regulations.
She explained that certain legislators in the progressive wing of the Democratic party “are uncomfortable with assets that the government does not control.” Less libertarian-leaning conservatives “who struggle with that same notion” of supporting an unidentified rival to the U.S. dollar also have a similar issue.
To change this, the crypto sector has started to campaign vigorously. On June 3, 2024, a few days after the veto, Coinbase gave a $25 million donation to Fairshake, a federal super political action committee (PAC) that supports candidates that support cryptocurrencies.
There is considerable involvement from the banking lobby. As McCabe pointed out, “It is well known that the big bank and digital asset sectors supported the resolution to overturn SAB 121.” He said, “The banking industry and pro-crypto lobbies could have an effect.”
The banking and pro-crypto lobbyists can either work to ensure that the Lummis-Gillibrand Payment Stablecoin Act takes effect immediately or persuade legislators to pressure the SEC to remove SAB 121.
Democrats may be pleased with both alternatives because they would lessen the possibility of a political hot potato in the run-up to the U.S. elections and wouldn’t directly hurt Biden’s candidacy.