President Joe Biden has vetoed a congressional resolution that sought to overturn the Securities and Exchange Commission’s (SEC) approach to banks and crypto. The resolution specifically targeted the SEC’s Staff Accounting Bulletin 121 (SAB 121), which provides guidance on how banks should handle customers’ crypto assets. Under this guidance, banks must treat those assets as liabilities. While regulators argue that this approach is necessary to protect investors, banking groups have criticized it as being too expensive for them to handle crypto.
In a statement, President Biden defended the SEC’s approach, stating that SAB 121 reflects the considered technical views of the SEC staff regarding the accounting obligations of firms that safeguard crypto-assets. He argued that the congressional resolution would inappropriately restrict the SEC’s ability to set appropriate guardrails and address future issues. The president emphasized that his administration would not support measures that jeopardize the well-being of consumers and investors.
The congressional resolution, known as H.J.Res. 109, received mostly Republican support. However, it also garnered support from 21 Democrats in the House, including Majority Leader Chuck Schumer in the Senate. Representative Mike Flood, the Republican congressman who sponsored the resolution in the House, urged President Biden to reconsider his veto decision, citing overwhelming opposition to SAB 121.
The opposition to SAB 121 comes from various organizations, including the American Bankers Association (ABA) and other financial industry lobbying groups, as well as the crypto industry advocacy group Stand With Crypto. In an open letter to President Biden, these organizations argued that SAB 121 effectively prevents regulated banking organizations from offering digital asset custody at scale. They believe that treating these assets as owned rather than simply custodied by banks hinders their ability to provide services in the crypto space.
While President Biden’s veto maintains the current approach to banks and crypto, his administration expressed a willingness to engage in further negotiations on crypto regulation. The White House’s announcement stated that they are eager to work with Congress to establish a comprehensive and balanced regulatory framework for digital assets. They aim to build on existing authorities to promote responsible development and innovation in the digital asset and payment space, reinforcing the United States’ leadership in the global financial system.
President Biden’s decision to veto the congressional resolution demonstrates his commitment to protecting consumers and investors while acknowledging the need for a regulatory framework that fosters innovation in the digital asset sector. The ongoing discussions around crypto regulation highlight the importance of striking a balance between safeguarding investors and promoting the responsible growth of digital assets.