President Joe Biden on Friday vetoed a congressional resolution aimed at overturning the U.S. Securities and Exchange Commission's (SEC) controversial accounting bulletin on crypto assets. The veto marks a significant stance by the Biden administration in the ongoing debate over the regulation of digital assets.
"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," President Biden said in a statement released by the White House. He emphasized the necessity of maintaining robust regulatory frameworks to protect consumers and investors in the evolving digital asset market.
The SEC's Staff Accounting Bulletin 121 (SAB 121) has been a contentious issue since its introduction. The guidance mandates that financial institutions holding crypto assets for customers must record those assets on their own balance sheets. Critics argue that this requirement imposes significant burdens on traditional financial institutions, potentially deterring them from offering crypto-related services.
The congressional resolution to overturn SAB 121 had garnered bipartisan support, passing both the House and Senate with relative ease. However, the White House had signaled its intention to veto the measure, underscoring the administration's commitment to comprehensive regulation of the crypto sector.
In his veto statement, Biden reiterated his administration's willingness to collaborate with Congress on establishing a balanced regulatory framework for digital assets. "My administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities," he wrote.
The timing of the veto was particularly notable, as it followed urgent appeals from both banking groups and members of Congress. These stakeholders had sent letters to the President, urging him to support the resolution to overturn SAB 121. They contended that the SEC's guidance would make it prohibitively expensive for regulated entities to participate in the custody business, ultimately harming consumers by reducing their options.
Despite these appeals, President Biden maintained that rescinding the SEC's guidance would undermine the agency's broader regulatory authority. "This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC's broader authorities regarding accounting practices," he stated.
Critics of the SEC's bulletin have pointed out procedural issues, noting that the time for congressional review under the Administrative Procedure Act had technically expired. They also argued that SAB 121 did not constitute a rule, thus falling outside the scope of the Congressional Review Act. However, the Government Accountability Office (GAO) disagreed with this interpretation.
Senator Ron Wyden (D-Ore.), a member of Biden's party who voted for the resolution, expressed concerns about the guidance at CoinDesk's Consensus 2024 conference in Austin, Texas. Wyden argued that SAB 121 creates a different standard for crypto assets compared to other financial assets, complicating the regulatory landscape.
The President's veto underscores a critical juncture in the regulation of digital assets. As the crypto market continues to grow and evolve, the need for clear and effective regulatory frameworks becomes increasingly important. The Biden administration's stance reflects a cautious approach aimed at balancing innovation with consumer protection and financial stability.
