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The U.S. Congress has passed a bill targeting the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). This action marks the first standalone crypto legislation seeking to reverse the requirement that crypto assets be recorded as liabilities on balance sheets.

Passed last week, the legislation under the Congressional Review Act (CRA) seeks to repeal SAB 121. The bill mandates that entities holding crypto assets for clients recognize these assets and corresponding liabilities at fair value in their financial statements. 

This requirement has been heavily criticized for potentially placing significant financial burdens on financial institutions, a factor that could discourage them from offering crypto asset custody services.

U.S. Senator Cynthia Lummis (R-WY) declared on social media that the Senate’s decision represents a major step forward for financial innovation. She touted the move as a direct response to what she perceives as the Biden administration and SEC Chair Gary Gensler’s aggressive stance on cryptocurrency regulation. 

This legislative effort is the first of its kind, focusing solely on cryptocurrency.

Meanwhile, House Financial Services Committee Chair Patrick McHenry (R-NC) has also voiced similar sentiments, arguing that SAB 121 acts as a significant barrier for financial entities.

This, he noted, makes it prohibitively expensive for these firms to handle crypto assets. McHenry termed the rule as “one of the most glaring examples of regulatory overreach” under Gensler’s leadership at the SEC.

Interestingly, President Joe Biden had opposed the legislation and suggested a possible veto. The White House released a statement articulating concerns that reducing the SEC’s regulatory capacity could lead to “substantial financial instability and market uncertainty.”

The U.S. House of Representatives initially voted to overturn SAB 121 earlier this month, with the Senate following suit last week. This was followed by a U.S. Senate’s vote to repeal the bulletin last week.

President Biden has publicly expressed his anti-crypto stance. This was reflected in his proposed financial measures in the recent budget, which includes a crypto mining tax and a ‘wash sale’ rule for digital assets.

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