President Joe Biden has vetoed a measure aimed at overturning a contentious directive from the U.S. Securities and Exchange Commission (SEC) regarding the accounting practices for companies handling cryptocurrency assets.
In a letter addressed to the House of Reps and published on the White House website, President Biden stressed his administration’s commitment to protecting investors and consumers, stating that appropriate safeguards are essential to leveraging the opportunities and benefits of cryptocurrency innovation.
The measure in question sought to repeal the commission’s staff accounting bulletin, known as SAB 121, which has been a point of contention within the crypto sector. The House had previously passed the now vetoed measure with a 228–182 vote, primarily supported by Republicans but with the backing of 21 Democrats as well. Shortly thereafter, the Senate also approved the measure with a 60–38 vote, including support from several Democrats, notably Chuck Schumer, the Senate majority leader.
For a veto to be overturned, a two-thirds majority vote is required in both the House and Senate. Despite the bipartisan support, Biden had indicated his intention to veto the bill in a prior statement, arguing that restricting the commission’s ability to enforce a robust and effective financial regulatory structure for crypto could lead to significant financial instability and unpredictability in the market.
This isn’t the first instance where Biden has vetoed bipartisan measures. He previously vetoed a resolution aimed at overturning a joint employer regulation, which had also passed both chambers with bipartisan support.
The controversy surrounding SAB 121 stems from its implications for banks and other institutions that custody digital assets. Critics argue that it could hinder banks from safeguarding digital assets as it requires companies that custody crypto to list customer crypto holdings as liabilities on their statements of financial position.
The SEC maintains that the bulletin is just a staff guideline that is not legally binding and is meant to improve investor transparency. Last month, a SEC representative highlighted past failures of crypto companies where customers were left seeking legal recourse through bankruptcy courts; the official emphasized the importance of disclosures that provide a clear understanding of the risks taken by crypto custodians.
Biden’s veto has sparked discontent within the cryptocurrency community, particularly given the speculation that his administration has been making efforts to engage with the industry more positively.
Crypto Council CEO Sheila Warren expressed her disappointment, noting that publicly stated positions can be challenging to retract. Additionally, Representative Mike Flood voiced his frustration on social media, acknowledging the setback but reaffirming his belief in the enduring significance of crypto and digital assets in the future of the U.S.’s financial landscape.
Crypto industry actors such as HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE) can only hope that Congress takes the initiative and passes legislation to not only oversee the industry but also foster growth so that the enforcement-first approach being taken by the SEC is brought to an end.
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