President Biden vetoes crypto custody bill

President Joe Biden vetoed HJRes. 109, a congressional action that would reverse the Securities and Exchange Commission’s current approach towards banks and crypto.

The decision specifically targeted the SEC’s Staff Accounting Bulletin 121, which provides guidance on how banks can manage customers’ crypto assets; in fact, banks are supposed to treat these assets as liabilities. Banking groups have criticized this approach for making it prohibitively expensive to deal with cryptocurrency, while regulators argue the protections are necessary to protect investors, especially after the collapse of high-profile crypto companies like FTX.

“SAB 121 reflects the considered views of technical SEC staff regarding the accounting obligations of certain firms that maintain crypto assets,” Biden said in a statement. “This Republican-led decision would inappropriately restrict the SEC’s ability to establish appropriate safeguards and address future issues by invoking the Congressional Review Act.”

Biden said his administration “will not support measures that would jeopardize the well-being of consumers and investors.”

HJRes. Bill 109 passed with mostly Republican support — but 21 Democrats backed the resolution in the House, and Majority Leader Chuck Schumer was among the Democrats backing the resolution in the Senate.

The President had previously indicated his intention to veto the resolution, and Rep. Mike Flood (the Republican congressman who sponsored HJRes. 109 in the House) argued: “It is clear that there is overwhelming opposition to SAB 121 and that it will force President Joe Biden to make this decision.” I urge you to reconsider your previous declaration of intent to veto the resolution.”

Organizations opposing SAB 121 include the American Bankers Association and other financial industry lobby groups, as well as crypto industry advocacy group Stand With Crypto.

“SAB 121 effectively prevents regulated banking institutions from offering digital asset custody at scale because it treats assets as owned rather than merely custodial by a banking institution,” the ABA and other industry groups said in an open letter to President Biden.

The White House’s announcement left the door open to further negotiations on crypto regulation.

“My administration is eager to work with Congress to provide a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, that will promote responsible development of digital assets and payment innovations and help strengthen U.S. leadership in the global financial system,” he said. Biden.