(Kitco News) – U.S. President Joe Biden has made good on his threat to veto a resolution that would have overruled the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 121.
SAB 121 was designed to help clarify accounting treatment for crypto assets, directing banks holding a customer's digital tokens to do so on its own balance sheet, potentially incurring massive capital expenses.
The guidelines were set to take effect on April 11 despite being widely criticized by both lawmakers and crypto industry leaders, who warned the bill would stifle innovation and further push the crypto industry to more welcoming jurisdictions.
Both the Senate and the House previously approved the measure with bipartisan support. A total of 60 Senators backed the bill while 38 opposed it. In the House, the measure passed by a margin of 228 to 182.
Before it was approved in the Senate, Biden threatened to veto the measure after it successfully passed out of the House.
"SAB 121 was issued in response to demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers," Biden said in a statement, adding he “strongly opposes” disrupting the SEC's work on this.
“By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets including financial stability,” the statement said. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty. If the President were presented with H.J. Res. 109, he would veto it.”
After the veto, which was announced on Friday, the White House released a statement justifying the action.
“SAB 121 reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto-assets,” the statement said. “By virtue of invoking the Congressional Review Act, this Republican-led resolution would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues. This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices.”
“My Administration will not support measures that jeopardize the well-being of consumers and investors,” the statement continued. “Appropriate guardrails that protect consumers and investors are necessary to harness the potential benefits and opportunities of crypto-asset innovation. My Administration is eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, which will promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system. Therefore, I am vetoing this resolution.”
The crypto community has responded to the decision with frustration, saying it will only serve to stifle innovation and put the U.S. even further behind more welcoming jurisdictions.
"This is a slap in the face to innovation and financial freedom," tweeted Cody Carbone, Chief Policy Officer at Digital Chamber.
Crypto investor Ryan Adams suggested the move will hurt Biden’s re-election chances in November.
“Biden just Vetoed the only pro-crypto bill to ever come across his desk. This was a layup,” Adams tweeted. “SAB 121 is an anti-crypto rule put in place by Gensler’s SEC to stop banks from holding crypto. Crypto hates it. The banks hate it. All he had to do was not veto the repeal. This will cost Democrats in November.”
According to Fox Business Journalist Eleanor Terrett, even SEC Commissioner Mark Uyeda thinks that SAB 121 should be withdrawn, and sees the veto as an unfortunate event.
“Issuing SAB 121 by regulatory edict rather than rulemaking under the Administrative Procedure Act effectively avoids judicial review, which undercuts our system of checks and balances against an over-reaching administrative state,” Uyeda said. “The veto of H.J Res. 109 was unfortunate. SAB 121 ought to be withdrawn.”
And Senator Cynthia Lummis (R-WY) said the veto went against “the will of the American people” and vowed to continue to “fight to promote financial innovation and key protections for crypto assets this admin seems hellbent on stifling.”
I will not stand idly by as this admin attempts to skirt the law, and I will continue to fight to promote financial innovation and key protections for crypto assets this admin seems hellbent on stifling.
My statement on the president's decision to veto my SAB 121 CRA⬇️ pic.twitter.com/pXjGXPi6fN— Senator Cynthia Lummis (@SenLummis) June 1, 2024
