President Biden Rejects Legislation on Cryptocurrency Custody

President Joe Biden has exercised his veto power against H.J.Res. 109, a legislative measure aimed at negating the Securities and Exchange Commission’s (SEC) existing policies on banks and cryptocurrency operations.

The resolution specifically challenged the SEC’s Staff Accounting Bulletin 121, which outlines guidelines for banks on managing customer cryptocurrency assets, mandating these assets be classified as liabilities. This mandate has been met with opposition from banking entities citing the high costs associated with cryptocurrency management, whereas regulatory bodies see it as pivotal for safeguarding investors, especially in the wake of major cryptocurrency firm failures, such as FTX.

“SAB 121 embodies the SEC staff’s well-considered views on the accounting responsibilities of companies that secure crypto-assets,” stated Biden in his proclamation. “The use of the Congressional Review Act to pass this resolution would improperly limit the SEC’s capacity to implement necessary protections and address emerging concerns,” he added.

Biden also declared his administration’s stance against actions that could compromise investor and consumer wellbeing.

The passage of H.J.Res. 109 saw majorly Republican backing, although it garnered support from 21 Democrats in the House, including endorsement from Senate Majority Leader Chuck Schumer.

The president had signaled his veto intention previously, while Representative Mike Flood, a Republican and the sponsor of H.J.Res. 109, advocated for a reconsideration by Biden, citing substantial opposition to SAB 121.

Key opponents to SAB 121 include prominent bodies like the American Bankers Association and various financial sector lobbying groups along with cryptocurrency advocacy organization Stand With Crypto.

“SAB 121 essentially prevents banking institutions from effectively providing large-scale digital asset custody services, treating these assets as being owned by the institutions rather than merely in their custody,” explained the ABA among other groups in a letter to President Biden.

The response from the White House hints at future dialogues regarding cryptocurrency regulatory measures.

Biden expressed, “My Administration looks forward to collaborating with Congress to establish a thorough yet balanced regulatory framework for digital assets that builds upon existing powers, facilitating the prudent evolution of digital asset and payment platforms while ensuring the United States remains a driving force within the international financial landscape.”