Biden vetoes bill overturning SAB 121, says standard 'necessary' for crypto innovation

U.S. President Joe Biden vetoed a bill to overturn a controversial Securities and Exchange Commission bulletin establishing accounting standards for firms that custody crypto. 

"My Administration will not support measures that jeopardize the well-being of consumers and investors," said President Biden in a letter addressed to the U.S. House of Representatives posted on the White House website.  "Appropriate guardrails that protect consumers and investors are necessary to harness the potential benefits and opportunities of crypto-asset innovation."

Earlier this month, the full House and Senate voted in favor of the measure to repeal the SEC's staff accounting bulletin, also called SAB 121. The House previously voted 228-182 to pass the measure, with mostly Republicans, though 21 Democrats did sign on. A week later, the Senate voted 60 to 38, with several Democrats, including Senate Majority Senate Majority Leader Chuck Schumer, D-N.Y., voting in favor of the measure. 

Overturning a veto requires a two-thirds majority from both houses of Congress. 

Veto plan

President Biden had said he would veto the measure, in a "statement of administration policy" released by the White House last month. Specifically, the White House said that "limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty."

Biden has vetoed measures before that passed the Senate and House with bipartisan votes. For example, the president vetoed a measure in May to overturn a joint employer rule that had passed the Senate and House by bipartisan margins, according to Bloomberg Law. 

The bulletin has drawn controversy over the past year over concerns in the crypto industry that it could prevent banks from safeguarding digital assets. It requires firms that custody crypto to record customer crypto holdings as liabilities on their balance sheets.

The SEC has said that SAB 121 is "non-binding staff guidance"  that strengthens disclosures to investors. 

"Time and again, we have seen crypto firms fail and watched as their customers lined up at the bankruptcy court in hopes of getting what they thought was legally theirs," an SEC spokesperson said in a statement to The Block last month. "We’ve also seen the risks to investors in firms that safeguard these assets when they are hidden off balance sheet. These disclosures provide investors important line of sight into the level of risk taken by crypto custodians."