Senate Overwhelmingly Votes to Overturn SEC Crypto Rule on Banks

The U.S. Senate voted 60 to 38 to nullify the SEC's Staff Accounting Bulletin No. 121, which requires banks to hold customers' digital assets on their balance sheets and maintain capital against them. The Blockchain Association and Representative Mike Flood also urged President Biden to reconsider his veto threat considering the widespread opposition against the SEC’s rule. Meanwhile, the SEC is facing even more criticism from the crypto community with the launch of the anti-SEC meme coin, NotWifGary (NWG). Globally, India proposed multi-regulator oversight for crypto, while Switzerland plans to implement the Crypto-Asset Reporting Framework to improve tax transparency by 2026.

Senate Vote Challenges SEC's Crypto Asset Rule

The United States Senate has passed a joint resolution requiring the Securities and Exchange Commission (SEC) to strike down a rule that impacts financial institutions doing business with crypto firms. On May 16, Senators voted 60 to 38 in favor of H.J.Res. 109, nullifying the SEC’s Staff Accounting Bulletin No. 121. This rule mandates that banks hold customers’ digital assets on their balance sheets and maintain capital against them.

The Blockchain Association advocacy group was stunned by the 60 'Yeas' vote which revealed the very strong disapproval of the rule from both houses of Congress.

It is, however, important to keep in mind that President Joe Biden has shared his intention to veto the resolution if it got passed as he believes the rule is there to protect crypto-asset investors and the broader financial system. If vetoed, the legislation will return to Congress and will then need a two-thirds majority vote to pass again.

Representative Mike Flood, who is the resolution’s sponsor, called for President Biden to reconsider his veto threat considering the widespread opposition to SAB 121.

This resolution could pave the way for future crypto legislation, like the Financial Innovation and Technology for the 21st Century Act, which will define the regulatory roles of the SEC and the Commodity Futures Trading Commission concerning digital assets.

Meme Coin Takes Aim at the SEC

The SEC is also facing opposition from the crypto community after a small group of community members came together to create a decentralized meme coin called NotWifGary (NWG). The project is anti-SEC and pro-Ethereum, and emerged in response to the regulator’s recent intensified focus on the crypto industry.

Despite some members having a background in the zkEVM ecosystem Linea, the project is entirely personal for the team and has no ties to Linea or Consensys.

According to the NWG team, the meme coin is a form of peaceful activism that is more focused on fun, in contrast to the companies who have their hands full with the SEC and have to devote a lot of resources to legal battles. NWG plans to increase awareness of these issues and wants to create engaging talking points through meme culture. The project was also created to shed some light in the regulatory uncertainty that is impacting Ethereum.

If successful, NWG wants to establish a treasury and a decentralized autonomous organization (DAO). The long-term goal is for companies that get sued by regulators and face legal cost challenges to submit proposals to the DAO for financial support from the NWG treasury. For now, the primary focus is actually launching the meme coin.

On May 15, the official NWG project posted on X that it plans to stand against Gary Gensler and the SEC, who they openly accused of unlawfully threatening digital property by targeting Ethereum and open-source developers. In essence, NWG wants to become a "CultureCoin" with a fair and decentralized launch.

The meme coin will launch on Linea as an ERC-20 token, deployed from a multisig wallet involving the Original Project Supporters. NWG is not live yet, but plans to bootstrap its liquidity pool through community donations to ensure a decentralized and fair launch. Donations will not grant any allocation of NWG tokens. Instead, donors will receive the 'NWG Launch Team' Soulbound Token (SBT).

NWG is not alone in its dissatisfaction with the SEC. Democratic Representative Wiley Nickel stated on May 15 that the SEC is turning crypto into a "political football," forcing President Joe Biden to choose sides.

India Plans Multi-Regulator Oversight for Crypto

It is not just the US with a laser focus on crypto regulation at the moment. The Securities and Exchange Board of India (SEBI) proposed that multiple regulators oversee cryptocurrency trading in India.

Government officials submitted these documents to a panel advising the finance ministry on policy. Rather than having one unified regulator, SEBI recommended that different regulators collectively oversee digital asset activities in their jurisdictions. SEBI would monitor digital assets classified as securities, initial coin offerings, and issue licenses for financial products, while the Reserve Bank would oversee fiat-backed stablecoins.

Crypto-related insurance would be regulated by the Insurance Regulatory and Development Authority of India, and the Pension Fund Regulatory and Development Authority would handle pension matters related to digital assets. Meanwhile, the Consumer Protection Act would apply to disputes between investors.

The Reserve Bank holds a much more skeptical view of cryptocurrencies and supports banning stablecoins, and is very concerned that digital assets could facilitate tax evasion. It also highlighted that decentralized peer-to-peer transactions rely on voluntary compliance, posing risks to fiscal stability, as well as argued that cryptos might result in a loss of income from money creation for central banks.

India has been trying to adjust its regulatory framework to include digital assets. In December 2023, the country issued 15 notices of noncompliance to foreign crypto exchanges, blocking their URLs and mobile applications for local users.

Currently, KuCoin and Binance are the only exchanges with licenses from the Financial Intelligence Unit to restart operations.

Switzerland Plans to Implement Global Crypto Reporting Standards

Meanwhile, the Federal Council of Switzerland issued a public consultation to adopt global standards for crypto tax reporting, aiming to treat crypto assets and traditional assets equally.

This consultation is part of a plan to implement the Crypto-Asset Reporting Framework (CARF), which will improve tax transparency. The council released a consultation paper on May 15 to hear the public’s opinion on joining the Automatic Exchange of Information (AEOI), which is an international cooperation effort to combat tax evasion. Switzerland’s extension into the AEOI is planned for Jan. 1, 2026.

The AEOI was established by the Organisation for Economic Co-operation and Development (OECD) for the G20 nations and later extended to other countries. It also promotes the exchange of financial information between tax authorities. Although Switzerland adopted the OECD’s Common Reporting Standard (CRS) in 2014, it did not include CARF, which deals with the handling of crypto assets and their providers.

Now, the Federal Council wants to rectify this and believes that implementing CARF will boost Switzerland’s progressive crypto market regulation and maintain the credibility and reputation of its financial center.

CARF implementation requires parliamentary approval and cannot rely on the consultation paper responses. By 2027, almost 50 countries are expected to adopt CARF regulations to collectively push back against money laundering. The consultation period will last just over three months until Sept. 6.

Additionally, Canada’s annual budget for April 2024 also indicated plans to implement CARF by 2026. The CARF will impose new reporting requirements on crypto asset service providers, including cryptocurrency exchanges, brokers, dealers, and automated teller machine operators. Once the regulation is in place, Canadian people and businesses will be required to report transactions involving crypto assets and fiat currency, as well as crypto-to-crypto transactions, to the Canada Revenue Agency.