US Senate votes in favor of Bitcoin-friendly banking regulation

Yesterday, the US Senate voted 60 to 38 in favor of H.J. Resolution 109, which would allow US banks to offer custody services for Bitcoin and Co. without any disadvantages. The resolution would override SAB 121, which obliges banks to hold capital equivalent to the amount of Bitcoin held in custody.

The large approval for the Bitcoin-friendly resolution sets a milestone in US politics, as Republican Senator Cynthia Lummis emphasized on 𝕏

Interest groups from the banking sector were already campaigning in February to abolish SAB 121 so that they can also act as custodians for Bitcoin ETFs - Blocktrainer.de reported. It is not usual for financial service providers to hold customer assets as a liability on their own balance sheet and therefore have to hold equity against them. The fact that there has been a special regulation for digital assets such as Bitcoin with SAB 121 since 2022 has caused a lot of displeasure in politics, especially in recent weeks.

Last week, the US House of Representatives voted in favor of H.J. Res. 109, which aims to overturn SAB 121. Now that the Senate has also voted in favor, the resolution has landed on US President Joe Biden's desk. However, he had already announced that he would veto it. The reason for this was that, according to Biden, H.J. Res. 109 would disrupt the efforts of the US Securities and Exchange Commission (SEC) to protect investors in the crypto market and the broader financial system.

The Administration strongly opposes the passage of H.J. Res. 109 because it would disrupt the Securities and Exchange Commission's (SEC) work to protect investors in the crypto-asset markets and to protect the broader financial system. H.J. Res. 109 would invalidate SEC Staff Accounting Bulletin 121 (SAB 121), which reflects the SEC staff's views on the accounting obligations of certain entities that custody cryptoassets.
_{From the Biden administration's statement}

However, the pressure on the US government is increasing. Especially because the Senate voted in favor of the resolution on a bipartisan basis. This was emphasized by Bitcoin-friendly US Senator Cynthia Lummis in a post on 𝕏, in which she also addressed President Biden directly and called on him to sign the resolution.

Republican Senator Mike Flood, who along with Senator Lummis was also a co-sponsor of the resolution, used similar words towards the President.

As was to be expected, there was opposition to the resolution from Democratic Senator Elizabeth Warren, among others. She emphasized that cryptocurrencies are something completely different from what financial service providers are used to due to possible hacks. She also drew attention to the risks in the market using the example of the collapsed crypto exchange FTX.

If Biden vetoes the resolution, it will go back to the House of Representatives for a vote. As there were only 228 to 182 votes in favor of the resolution in the House, but a majority of two thirds would be required to overrule the President, the outcome of the case is still unclear.

With the US election just a few months away, President Biden is in danger of alienating potential voters with his anti-bitcoin stance. Meanwhile, presidential candidate Trump is already campaigning by presenting himself as more crypto-friendly than his rival - Blocktrainer.de reported.

It remains to be seen whether Biden will change his mind, whether the resolution will come into force despite his opposition or whether it will be rejected after all.

However, it is clear that support for Bitcoin-friendly regulation is growing in US politics. It is difficult to say to what extent the lobbying power of the US financial industry is behind this and to what extent it is the conviction of the politicians themselves. But with the rise of Bitcoin, more and more influential people generally seem to have an interest in this continuing.

Michael Saylor, founder of the Bitcoin-based software company MicroStrategy, also recognizes this. He commented on the decision in the Senate that it is no longer just Wall Street that wants to promote Bitcoin, but also politicians.

If SAB 121 is overturned, this would be a decisive step towards banks accepting Bitcoin as collateral for loans. In addition to the Bitcoin spot ETFs approved in the US and the already adopted fair value accounting guideline for Bitcoin on corporate balance sheets, this would be another major catalyst for the institutional adoption of the asset, which is only 15 years old.