On Thursday, the U.S. Senate joined the House of Representatives in a bipartisan effort to repeal the controversial Securities and Exchange Commission (SEC) crypto policy known as Staff Accounting Bulletin No. 121 (SAB 121). The Senate voted 60-38 in favor of the resolution, with a dozen Democrats aligning with the majority of Republicans. However, it fell short of the votes needed to override a potential veto by President Joe Biden.

SAB 121, issued by the SEC in 2022, dictated that companies holding customers' cryptocurrencies must record them on their own balance sheets. This policy had significant capital implications for banks working with crypto clients. Many Republican lawmakers criticized the SEC for implementing this policy without following the necessary rule process.

Lawmakers utilized the Congressional Review Act to challenge SAB 121, which grants Congress the authority to overturn federal rules. Notably, this represents the first time both chambers of Congress have passed standalone legislation specifically targeting the crypto industry.

While the bipartisan effort to repeal SAB 121 gained substantial support, it was noted that the resolution lacked enough votes to be veto-proof. President Biden has previously expressed his opposition to the resolution, stating that removing the policy in this manner could undermine efforts to protect investors in crypto-asset markets and safeguard the broader financial system.

Even Senate Majority Leader Chuck Schumer, a Democrat, broke party ranks and opposed the SEC's crypto policy, joining other Democratic leaders in the effort. Senator Cynthia Lummis, a Republican from Wyoming and an advocate for the resolution, referred to SAB 121 as a "disaster" that failed to protect consumers.

Various industry stakeholders have expressed concerns over the impacts of SAB 121 and its potential disruption to financial innovation. Proponents of the resolution see its passage as a win for financial innovation and a rejection of the Biden administration's handling of crypto assets.

It should be noted that if the resolution successfully repeals SAB 121, the SEC would be prohibited from pursuing similar policies in the future under the law. However, the White House warned that this constraint could hinder the SEC's ability to establish necessary guardrails and address future issues related to crypto-assets and financial stability.

The House and Senate lawmakers who backed the resolution called on the SEC to withdraw SAB 121 voluntarily before it reaches President Biden's desk. They argue that the Congressional Review Act should not have been necessary for this issue and emphasize the importance of the SEC adhering to the statutory rulemaking process.

This latest development signifies a significant move by Congress to address crypto-related matters, following the inclusion of a crypto taxation provision in an infrastructure law. The outcome of the repeal effort will be closely watched, as it could have far-reaching implications for the regulation and future development of the crypto industry.

At the time of reporting, representatives from the SEC had not responded to requests for comment.