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  • L Higgins and S Pettigrove

Presidential veto stirs up the crypto world

President Joe Biden has defended his decision to veto a resolution aimed at overturning the US Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 121. This controversial decision has drawn immediate criticism from the crypto community.

SAB121 was first issued by the SEC in March 2022, and required institutions that custody crypto-assets to record these holdings as assets and liabilities on their balance sheet. Critics argued that this requirement effectively prevented banks and other regulated entities from providing digital asset custody services at scale, and could deter banks from scaling a crypto business by imposing onerous capital requirements. SAB121 was also controversial as it treated crypto holdings differently from other custodied assets, which are traditionally held off-balance sheet. These factors combined led to significant pushback from the blockchain community, lawmakers and even the American Banking Association weighed in against SAB121.

The House of Representatives voted to repeal SAB121 by a vote of 228 to 182, passing the bill to the Senate. The Senate, mirroring the House’s sentiment, voted to repeal SAB121 by a significant margin of 60-38 votes. Significant numbers of Democrats joined the Republican caucus to vote the measure through.

In his official letter dated 31 May 2024, President Biden emphasised his administration’s commitment to consumer and investor protection, stating, “My Administration will not support measures that jeopardize the well-being of consumers and investors.” The letter further explained the President's view that challenging the proposed guidelines of SAB121 would undermine the SEC’s authority. He argued that reversing the SEC staff’s considered judgment in this manner could potentially undercut the SEC’s broader powers concerning accounting practices.

Following President Biden's veto, the Blockchain Association (a prominent crypto advocacy group) expressed its disappointment on 31 May via X, arguing that the administration’s decision undermines the bipartisan consensus in Congress, which recognized the potential harm posed by SAB 121:

The wider crypto community also voiced their frustrations on social media, arguing that the decision stifles innovation and hampers the industry at a critical juncture.

Cody Carbone, the chief policy officer of the Digital Chamber, described the decision as a “slap in the face to innovation and financial freedom” in a 31 May X post.

This decision marks a significant moment in the ongoing dialogue between the crypto industry and regulatory authorities, especially in light of the potential impact the "crypto vote" will have on the upcoming US Presidential election. This latest event again highlights the need for a balanced approach that fosters innovation while ensuring consumer and investor protection.

By L Higgins, M Bacina and S Pettigrove


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