First look at the first crypto bill submitted to the president—could banks help cryptocurrency achieve victory?
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First look at the first crypto bill submitted to the president—could banks help cryptocurrency achieve victory?
As long as we keep moving forward, cryptocurrency will win.
Navigating Web3 tides with focused insightsAuthor: Avichal - Electric ϟ Capital
Translation: TechFlow
The U.S. Senate has just overturned SAB 121 by a vote of 60 to 38—this is a big deal! This is the first crypto bill ever sent to the President. What is SAB 121? Why does this vote matter? And how did banks help crypto win here?
SEC Accounting Bulletin 121 was issued in 2022. It requires digital asset custodians to treat digital assets as liabilities and hold them at fair value on their balance sheets. Why is this problematic?
SAB 121 presents numerous issues, but the biggest one is this: if a bank holds $1 billion worth of Bitcoin for its customers, it must hold $1 billion in cash to offset this “liability” on its balance sheet.
This makes no sense—the assets don’t belong to the company; they belong to the customers.
SAB 121 was clearly designed to exclude banks from the cryptocurrency market, which reduces protection for customers. It also conflicts with guidance from the OCC. While seemingly minor, many people can detect a strong whiff of political suppression here.
Twenty-one Democrats joined Republicans in the House to pass a bill overturning SAB 121. The Senate has now followed suit with a 60–38 vote (including Leader @SenSchumer). The bill will now go to @JoeBiden for signature or veto. He has indicated he may veto it.
Why does all of this matter? Why should anyone care?
Democrats have largely followed @SenWarren's lead on financial and tech matters. But now, Democrats—including leadership—have broken ranks with @SenWarren in opposing the SEC’s overreach, signaling a major shift in power and leadership.
This sends a strong message to @SenWarren, @JoeBiden, @SECGov, and the markets. Democrats have made it clear they will move toward the center on market and financial regulation, distancing themselves from the far left. For those paying attention to polling in swing states, this comes as no surprise.
How did this happen?
A) Democrats in Congress and the Senate understand the importance of cryptocurrency
B) Extensive behind-the-scenes work by many individuals and groups (details below)
C) A curious and ironic alignment of incentives between banks and the crypto industry
Inside government figures such as @SenGillibrand, @SenLummis, @SenBooker, @RepRitchie, @PatrickMcHenry, @RepFrenchHill, and many others have worked tirelessly to convince their colleagues that opposing crypto is bad for America. They all deserve our gratitude.
Many of the Democrats who cast the right votes understand technology’s role in national security. @sethmoulton is a veteran in innovation within the armed forces, and @RepSlotkin serves on the Intelligence Committee. They understand the strategic importance of technology and don’t want to cede leadership.
How did banks help crypto? They called their members of Congress and senators to explain why SAB 121 is harmful. Because banks want to protect their own interests.
Banks are watching the record-breaking revenues of @Fidelity, @BlackRock, @BitwiseInvest, @coinbase, @Anchorage, and @circle. They now realize crypto can generate real revenue for them—and they don’t want to be left out.
I'm not saying banks are allies now—they’re self-interested. But we can use that to our advantage.
We can leverage their self-interest to push the world toward a more transparent, fair, auditable, decentralized, and private computing stack.
This vote also sends a powerful message to both Democratic and Republican leadership. The crypto ecosystem has just proven it can change laws—we can mobilize and persuade elected officials to change their minds. The implications are significant.
Now, if Biden vetoes the bill, SAB 121 may remain in effect—for now. In the long run, though, this is acceptable; it will eventually be overturned.
As long as we keep moving forward, crypto wins. If for no other reason, gerontocracy will die before the average crypto holder.
As a group of technologists, the crypto industry still has a long way to go before becoming truly skilled at working with policymakers to shape good policy.
But this week was a major victory for crypto—and proof that momentum has shifted. We should celebrate this moment.
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