The US Senate just voted 60 to 38 to overturn SAB 121, which is a big deal! This is the first encryption bill to be submitted to the president. What is SAB 121? Why does this vote matter? How are banks helping cryptocurrencies win here?
SEC Accounting Notice 121 will be released 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 a problem?
There are many problems with SAB 121, the biggest one being: If a bank holds $1 billion of Bitcoin in custody for customers, they must hold $1 billion in cash to offset this "liability" on their balance sheet.
This makes no sense, these assets are not the company's, they are the customers'.
SAB 121 is clearly intended to exclude banks from the cryptocurrency market, which reduces protection for customers. This also conflicts with OCC guidance. Although this is a small issue, many people can smell the smell of political suppression .
Twenty-one Democrats joined House Republicans in passing a bill to overturn SAB 121. The Senate just voted 60 to 38 (including Senate Majority Leader Chuck Schumer) to overturn SAB 121. The bill will go to US President Joe Biden for his signature or veto. He said he would likely veto it.
Why does this all matter? Why should anyone care?
Democrats have been following Massachusetts Sen. Elizabeth Warren's lead in finance and technology. Democrats, including leadership, have broken ranks against SEC overreach, marking a dramatic shift in power and leadership.
This sends a strong signal to Elizabeth Warren, Joe Biden, the SEC and the market. Democrats have made clear they will move toward the center and away from the far left on issues of markets and financial regulation . This comes as no surprise to those who follow swing state polls. But how did this happen?
- Democrats in Congress and Senate Understand Cryptocurrency’s Importance
- A lot of hard work from many people and groups behind the scenes (see more below)
- Interesting and Ironic Incentives Between Banks and the Crypto Industry
Internal government figures, such as New York State Senator Kirsten Gillibrand, Wyoming State Senator Cynthia Lummis, New Jersey State Senator Cory Booker, New York State Representative Ritchie Torres, North Carolina Representative Patrick McHenry, Arkansas Representative French Hill, and many others have been working tirelessly to convince their colleagues that opposing encryption is bad for the United States. They all deserve our thanks.
Many Democrats who cast the right vote understand the role technology plays in national security. Massachusetts Rep. Seth Moulton is a veteran of Armed Forces innovation, and Michigan Rep. Elissa Slotkin is a member of the Intelligence Committee. They understand the role of technology and don’t want to cede leadership.
How will banks help cryptocurrencies? They called their congressmen and senators and explained why SAB121 sucks. Because banks want to protect their own interests .
Banks are watching record earnings from @Fidelity , @BlackRock , @BitwiseInvest , @coinbase , @Anchorage , @circle . They now realize that cryptocurrencies can bring them real income, and they don’t want to be left on the sidelines.
I'm not saying banks are allies now, they're self-interested. We can take advantage of this. We can leverage their self-interest to move the world toward a more transparent, fair, auditable, decentralized, and private computing stack.
The vote also sent a powerful message to Democratic and Republican leadership. The crypto ecosystem has just proven that it has the ability to change laws, we can mobilize and convince elected officials to change their minds, and the impact cannot be underestimated.
Now, if Biden vetoes it, SAB 121 may remain in effect. This is acceptable in the long run, and it will eventually be overturned. As long as we keep moving forward, cryptocurrencies will win. If for no other reason than the elderly rulers die before the average cryptocurrency holder.
As a group of technologists, the crypto industry has a long way to go before it becomes truly adept at working with policymakers to develop good policy. But this week has been a big win for cryptocurrencies and shows that the momentum has shifted, and we should celebrate that.
