Biden Blocks Crypto Accounting Reform Despite Bipartisan Support

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President Biden Vetoes Bill to Overturn SEC Crypto Accounting Standards

In a significant move that underscores the ongoing regulatory tensions surrounding the cryptocurrency industry, U.S. President Joe Biden has vetoed H.J.Res. 109, a congressional resolution aimed at overturning the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121). This bulletin provides guidance on how banks should account for customers’ crypto assets, requiring these assets to be treated as liabilities.

Details of the Veto

President Biden justified his decision by emphasizing the need for appropriate consumer and investor “protections.” “Appropriate guardrails that protect consumers and investors are necessary to harness the potential benefits and opportunities of crypto-asset innovation,” the president stated in a letter to the U.S. House of Representatives. Despite this, many in the industry believe the bill itself provided these necessary protections.

Controversy and Bipartisan Support

SAB 121 has been a point of contention within the crypto industry over the past year, with critics arguing that it could deter banks from offering custodial services for digital assets. The bill to overturn SAB 121 passed with broad bipartisan support, making Biden’s veto a surprise and a point of contention among lawmakers and industry participants alike. The House had previously voted 228-182 in favor of the measure, with 21 Democrats joining the majority of Republicans. The Senate followed suit, voting 60-38, with notable support from several Democrats, including Senate Majority Leader Chuck Schumer (D-NY).

Implications for the Crypto Industry

Biden’s veto is seen by many as part of a larger crackdown on the cryptocurrency industry, an issue that is likely to become a hot topic in the 2024 presidential race. The move has heightened the debate on regulatory approaches to digital assets, making pro and anti-crypto stances a significant point of differentiation among political candidates.

Next Steps and Potential Override

Overturning a presidential veto requires a two-thirds majority in both houses of Congress, a challenging feat. House Financial Services Committee Chairman Patrick McHenry (R-NC) and U.S. Senator Cynthia Lummis (R-WY) have led a letter urging President Biden to reconsider his veto. “Given the overwhelming bipartisan votes, we urge you to sign H.J. Res. 109 into law or work with the SEC to rescind the staff guidance,” the lawmakers stated. They highlighted that rescinding SAB 121 is within the SEC’s authority and noted historical precedents for revising staff accounting bulletins.

The Broader Context

The veto of H.J.Res. 109 reflects the ongoing regulatory uncertainties and debates within the U.S. regarding the integration of cryptocurrencies into the financial system. Supporters of the bill argue that it protects essential custody services and shields consumers from increased bankruptcy risk. The bipartisan support for the measure in Congress indicates a strong desire for a more balanced regulatory framework that encourages innovation while ensuring consumer protection.

As the crypto industry continues to grow and evolve, the regulatory environment will play a crucial role in shaping its future. The outcome of this veto and the subsequent actions by Congress and the SEC will be closely watched by industry stakeholders, policymakers, and the broader public.

In the meantime, the debate over crypto regulation is set to be a pivotal issue in the upcoming presidential election, highlighting the divergent views on how best to manage the opportunities and risks associated with digital assets.