President Biden vetoes crypto custody bill

President Joe Biden has vetoed H.J.Res. 109, a congressional resolution aiming to overturn the Securities and Exchange Commission's (SEC) current guidelines on banks handling cryptocurrency assets.

The resolution targeted the SEC’s Staff Accounting Bulletin 121 (SAB 121), which mandates banks to treat customers' crypto assets as liabilities. This approach, criticized by banking groups for its cost implications, is defended by regulators as necessary for investor protection, especially after the collapse of high-profile crypto companies like FTX.

Biden's Veto on SAB 121 Resolution: Upholding SEC Authority and Commitment to Investor Protection

In his veto statement, Biden emphasized that SAB 121 represents the SEC staff’s technical views on the accounting responsibilities of firms safeguarding crypto-assets. He argued that the Republican-led resolution would unduly limit the SEC’s ability to establish appropriate regulatory measures and address future issues.

Biden reiterated his administration’s commitment to consumer and investor protection, stating they would not support measures that compromise these priorities.

Bipartisan Opposition to SAB 121: Calls for Reconsideration Amid Concerns Over Digital Asset Custody Regulations

H.J.Res. 109 received predominantly Republican support, though it also saw backing from 21 House Democrats and Senate Majority Leader Chuck Schumer. Representative Mike Flood, the Republican sponsor of the resolution, urged Biden to reconsider the veto due to widespread opposition to SAB 121.

Opponents of SAB 121, including the American Bankers Association (ABA) and the crypto advocacy group Stand With Crypto, argue that the bulletin effectively prevents regulated banks from offering digital asset custody on a large scale by treating these assets as owned by the banks rather than merely custodied.

The White House expressed willingness to engage in further discussions on crypto regulation. Biden highlighted his administration’s eagerness to collaborate with Congress to create a comprehensive regulatory framework for digital assets. This framework would build on existing authorities, promote responsible development of digital assets, and reinforce the United States' leadership in the global financial system.

Biden’s veto of H.J.Res. 109 underscores the administration’s focus on stringent regulatory measures for the crypto sector, prioritizing investor protection over industry concerns. While the veto maintains the current SEC stance, the administration remains open to future negotiations to develop a balanced regulatory framework for digital assets.