President Biden Vetoes SAB 121: The Controversial SEC Guidance Sparking Debate in the Crypto Industry

TLDR

• U.S. President Joe Biden vetoed a resolution that would have overturned the SEC’s Staff Accounting Bulletin (SAB) No. 121.
• SAB 121 requires institutions that custody crypto assets to record crypto holdings as liabilities on their balance sheets.
• The resolution to repeal SAB 121 passed both the House of Representatives and the Senate with bipartisan support.
• Biden argued that challenging the proposed guidelines would compromise the SEC’s authority and jeopardize the well-being of consumers and investors.
• The crypto community expressed frustration with the decision, arguing that it stifles innovation and hinders the industry.

President Joe Biden has vetoed a resolution that would have overturned the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 121, a controversial piece of accounting guidance for the cryptocurrency industry.

The resolution, which had garnered bipartisan support in both the House of Representatives and the Senate, aimed to repeal the SEC’s guidelines that require financial institutions holding crypto for customers to keep the assets on their own balance sheets.

The House of Representatives voted to repeal SAB 121 by a margin of 228 to 182, while the Senate echoed the decision with a 60-38 vote in favor of the repeal.

Despite the significant support from lawmakers, President Biden chose to exercise his veto power, arguing that challenging the proposed guidelines would compromise the SEC’s authority and jeopardize the well-being of consumers and investors.

In an official letter addressed to Congress, Biden stated,

“My Administration will not support measures that jeopardize the well-being of consumers and investors. This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices.”

The decision was met with immediate criticism from the cryptocurrency industry and its advocates.

The Blockchain Association, a crypto advocacy group, expressed disappointment in the administration’s choice to overrule the bipartisan majorities in both Houses of Congress who had recognized the potential harm created by SAB 121.

1/ Today, despite bipartisan support, Pres Biden vetoed the repeal of SAB 121, the SEC’s punitive, anti-crypto accounting guidelines. We’re disappointed that the admin chose to overrule bipartisan majorities in both Houses of Congress who recognized the harm created by SAB 121. pic.twitter.com/F6GP727UBx

— Blockchain Association (@BlockchainAssn) May 31, 2024

Critics of the guidance argue that it makes it too difficult for financial institutions to work with crypto companies and could prevent banks from safeguarding digital assets.

The SEC, however, maintains that SAB 121 is “non-binding staff guidance” that strengthens disclosures to investors and provides important insights into the level of risk taken by crypto custodians.

The broader crypto community took to social media to voice their frustrations with the decision, claiming that it stifles innovation and hinders the industry during a critical time.

Ripple CEO Brad Garlinghouse called the veto “incredibly disappointing,” while Digital Chamber chief policy officer Cody Carbone described it as “a slap in the face to innovation and financial freedom.”

well after only a few hours, this post didn't age well! ????

To say that this is incredibly disappointing from this white house – at an incredibly pivotal time – is an understatement.https://t.co/MYNSRVGyBP

— Brad Garlinghouse (@bgarlinghouse) May 31, 2024

Overturning a presidential veto requires a two-thirds majority from both houses of Congress, a hurdle that may prove challenging given the current political landscape.

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