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POTUS argues that overturning SAB 121 would "jeopardize the well-being of consumers and investors" and constrain the SEC's ability to address future issues in the crypto space.
President Joe Biden has vetoed a bipartisan resolution that aimed to overturn the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121), a controversial piece of guidance that establishes accounting standards for firms that custody crypto assets.
The resolution had passed both the House and Senate with significant support from Republicans and some Democrats.
In his veto statement, Biden emphasized the need for appropriate guardrails to protect consumers and investors in the crypto industry. He argued that overturning SAB 121 would “jeopardize the well-being of consumers and investors” and constrain the SEC’s ability to address future issues in the crypto space.
The veto comes despite criticism from the crypto industry and some lawmakers who argue that SAB 121 makes it too difficult for financial institutions to work with crypto companies. The guidance requires firms that custody crypto to record customer crypto holdings as liabilities on their balance sheets, which critics say could prevent banks from safeguarding digital assets.
However, the SEC has defended SAB 121, stating that it is non-binding staff guidance that strengthens disclosures to investors. The agency has pointed to instances where crypto firms have failed, leaving customers lining up in bankruptcy court to recover their assets.
The SEC argues that the disclosures required by SAB 121 provide investors with important insight into the level of risk taken by crypto custodians. The veto follows letters sent to Biden by banking groups and members of Congress, urging him to sign the resolution and overturn SAB 121. The banking organizations’ letter argued that the guidance blocks regulated banking groups from offering custody services, while the lawmakers’ letter called on the administration to work with the SEC to rescind the guidance if Biden still intended to veto the resolution.
Despite the veto, Biden expressed his willingness to work with Congress on legislation addressing the digital asset market, emphasizing the need for appropriate guardrails to protect consumers and investors. The veto highlights the ongoing debate over the regulation of the crypto industry and the balance between fostering innovation and protecting consumers.