It was quite a week for crypto in the U.S., marking one of the most important for the digital asset space and reflecting a clear rise in bipartisan support. 

A number of significant events unfolded in rapid succession, all seemingly positive for the crypto ecosystem and signaling a sudden shift in policy and sentiment ahead of the upcoming Presidential and Congressional elections.   

The Senate, with bipartisan support, votes to repeal SAB 121 through H.J. Res. 109, marking the first standalone crypto bill to pass both chambers of Congress 

On Thursday, May 16, a bipartisan Senate followed the House in voting to pass H.J. Res. 109 to overturn SEC Staff Accounting Bulletin No. 121 (“SAB 121”), which effectively precludes listed U.S. banking organizations from providing custodial services for digital assets by requiring them to keep those assets on-balance sheet.  The banking associations have been urging the SEC to modify SAB 121.  See Banking Associations May 14 letter to the Senate.   

Before the Senate’s vote, the White House issued a Statement of Administration Policy on May 8, expressing strong opposition to invalidating SAB 121 and stating that the President would veto H.J. Res. 109 if it reached his desk.  Despite the White House’s strong opposition, Senate Majority Leader Chuck Schumer (D-NY) and 10 other Democrats supported the repeal of SAB 121, sending a powerful political message.   

H.J. Res. 109’s original sponsor, Congressman Mike Flood (R-NE) stated that this “landmark result for digital asset regulation” by both the House and Senate has “delivered a clear, bipartisan message to the SEC that SAB 121 needs to go.”                   

The President has until June 3, a ten-day deadline from the day H.J. Res. 109 was sent to him (excluding Sundays), to decide whether to veto the decision, sign the joint resolution to nullify SAB 121, or simply not act.  If the President does not act by the deadline and Congress is in session, the President’s inaction will mean that the bill is effectively signed into law and SAB 121 is nullified.  Alternatively, the White House could request that the SEC withdraw SAB 121 to avoid forcing a decision by the President.   

Former U.S. President Trump embraces crypto 

On the evening of May 8, the same day the White House issued its Statement that it would veto an overturn of SAB 121, Former U.S. President Donald Trump held an event at Mar-a-Lago for buyers of his NFTs, at which he expressed his support for crypto, stating, “If you’re for crypto, you’re voting for Trump because they want to end it.”  On May 21, Trump became the first major party nominee to begin accepting donations in crypto for his Presidential campaign. 

In a stunning turnaround, the SEC approves Spot Ethereum ETFs 

Late Thursday afternoon, May 23, in what appeared to be an abrupt U-turn, the SEC approved eight spot Ethereum ETF 19b-4 changes of rule request forms from BlackRock, Fidelity, Bitwise, Van Eck, Ark 21Shares, Grayscale, Franklin Templeton and Invesco Galaxy.  The SEC’s approval reflects that the SEC views Ether as a commodity and not a security. 

The SEC’s approval on an accelerated basis caught many off guard as just the week prior almost everyone, including the Bloomberg ETF analysts, had predicted that, as there had been almost no engagement by the SEC with prospective issuers, there was little chance of an approval by the Thursday, May 23 deadline for a decision on VanEck’s filing.  However, on Monday, May 20, reports emerged that the SEC had suddenly started engaging with prospective issuers over updating their 19b-4 filings prior to the May 23 deadline. 

Although the SEC has approved the 19b-4s, it must now also approve the S-1 registration statements before the spot Ethereum ETFs can trade. 

House approves landmark FIT21 Bill with wave of Democratic support

On Wednesday, May 22, crypto market structure bill, Financial Innovation and Technology for the 21st Century Act (“FIT21”), which would provide market certainty and clarify how crypto markets should be regulated under the CFTC and the SEC, passed the House with very strong bi-partisan support in a 279-136 vote, with 71 House Democrats joining 208 Republicans to vote in favor. 

That same day, ahead of the House vote, the White House issued a Statement of Administration Policy opposing the passage of the current version of the bill, but adding that “[t]he Administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets . . . and help reinforce United States leadership in the global financial system.”  Notably, the President did not threaten to veto the bill if it passed.     

The bill will now go to the Senate where there is currently no counterpart bill and it is not clear what support the bill will have. 

CBDC Anti-Surveillance State Act passes the House 

On May 23, the CBDC Anti-Surveillance State Act, introduced by Majority Whip Tom Emmer (R-Minn.), passed the House by a 216-192 vote, with three Democrats voting in favor of the bill.  This bill aims to ensure that any U.S. central bank digital currency (CBDC) must receive explicit authorization from Congress. Further, it prohibits the Federal Reserve from issuing a surveillance-style CBDC that could give the federal government the ability to monitor individual Americans.  The bill will now head to the Senate, although its prospects for passing in that chamber remain unclear.