The political cost to Congress of overriding President Joe Biden’s veto of HJRes.109 could be very high.
Congress recently voted to pass HJRes.109, which would repeal SEC Staff Accounting Bulletin No. 121 (SAB 121), with unusual bipartisan support.
SAB 121 requires banks to record their customers’ cryptocurrency assets on their balance sheets as liabilities, a practice unique to digital assets. Removing this requirement would make it easier for banks to do business with the cryptocurrency industry.
The extraordinary show of bipartisan support led to the resolution passing the Senate by a vote of 60-38.
Despite support for the resolution in Congress, Biden vetoed the repeal, stating that he “will not support measures that endanger the welfare of consumers and investors.”
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What options do Congress and the cryptocurrency industry have if support is too strong?
Congress has the votes needed to override Biden’s veto
Although Biden’s veto represents a challenge, both houses of Congress would need a two-thirds majority to override it.
The House of Representatives will need 290 votes to override the veto, while the Senate will need 66 votes. The House of Representatives consists of 218 Republicans and 213 Democrats, while the Senate consists of 49 Republicans, 47 Democrats and four independent members.
Despite the pro-cryptocurrency trend within the Republican Party – with former president and current presidential candidate Donald Trump recently emerging as a supporter of the cryptocurrency industry – it has yet to sway many Democrats to successfully circumvent the veto.
But cryptocurrencies don’t seem to be as divisive or polarizing as other issues.
In a recent episode of Unbound Podcast, Republican Senator Cynthia Lummis He said the main reason he was able to gather bipartisan support to repeal SAB 121 was not due to any political success but “simply because the process was not followed properly.”
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The bipartisan votes were not only about voting for or against cryptocurrencies, but also about not following standard procedures.
Loomis acknowledged that the legislation would be difficult in a roughly evenly divided House and Senate, but said the “good news” is that digital assets are “not a partisan issue.”
On May 22, 2024, the U.S. House of Representatives approved the first digital asset legislation in U.S. history: the Financial Innovation and Technology for the 21st Century (FIT21) Act. He did so with strong bipartisan support, bringing together 71 Democrats who joined with 208 Republicans to pass the legislation by a two-to-one margin.
Congress also overrode vetoes used by presidents in the past, with vetoes used by Donald Trump and Barack Obama having been overridden.
However, Congress could make wiser choices.
Stablecoin law offers an alternative
The cryptocurrency industry has recently enjoyed broader support among U.S. lawmakers. The recent bipartisan votes for HJRes 209 and FIT21 were historic moments for the cryptocurrency community.
Some observers say the industry’s fragile support among lawmakers and the upcoming presidential election mean lawmakers are unlikely to move to override the veto.
Daniel McCabe, a former cryptocurrency lawyer and chief compliance officer at digital payments company Flexa, told Cointelegraph that there is “no realistic chance that Congress will override Biden’s reckless vetoes over the course of the ‘election year’. Congressional Democrats will not want to create electoral risks on this issue.
A direct conflict against the Democratic leader a few months before the federal elections is perhaps not the wisest solution.
However, McCabe said “Democrats still have a chance to pass the Lummis-Gillibrand Stable Pay Act, which effectively kills SAB 121 without having to override a veto.”
The Lummis-Gillibrand Stablecoin Payment Act was introduced on April 17, 2024 and provides a regulatory framework for stablecoins.
It also states that crypto assets held by financial institutions should not be considered assets or liabilities on their balance sheets, which is in direct contradiction to SAB 121.
Tyler Adams, co-founder of blockchain development company COZ, who has prior lobbying experience in Washington, D.C., told Cointelegraph that this could be a strategic choice for Democrats as they are “trying to cross a line fine on a subject that could be expensive. their legislative power. Seats and presidency.
Pro-encryption lobbyists take action
Loomis said some factions in both parties remain ideologically opposed to enacting proper regulation of cryptocurrencies.
She described how, within the progressive wing of the Democratic Party, some politicians are “uncomfortable with assets that the government does not control.” There are similar concerns among less libertarian conservatives “struggling with the same idea” of facilitating what they see as an unknown competitor to the U.S. dollar.
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The cryptocurrency industry is starting to make big efforts to change this. Days after the veto, on June 3, 2024, Coinbase donated $25 million to Fairshake, a cryptocurrency-focused super PAC that promotes pro-cryptocurrency candidates.
The banking lobby is also involved. “It is known that the decision to rescind SAB 121 was supported by both major banks and the digital asset sectors,” McCabe emphasized. He believes that “pro-crypto lobbyists and the banking sector can certainly have an impact”.
Banking and pro-crypto lobbyists have two options for removing SAB 121: advocating for a smooth entry into the Lummis-Gillibrand Payment Stablecoin Act or persuading lawmakers to pressure the SEC to withdraw SAB 121.
Both options could appeal to Democrats because they would not directly harm Biden’s candidacy and dispel the risk of a searing political crisis in the run-up to the U.S. election.
