Biden vows to veto congressional effort to overturn SEC crypto accounting rule

United States President Joe Biden; Image: Scott Olson/Getty Images

US President Joe Biden has taken a firm stance against a joint resolution seeking to overturn the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 121, which governs the accounting treatment of digital assets. Currently, in the House of Representatives, the resolution aims to reject the SEC's guidance on how financial institutions should account for digital assets, potentially leading to increased capital expenses.

The SEC introduced SAB 121 to address the risks posed by digital assets and assure that financial institutions have proper measures in place to protect consumers and maintain financial stability. However, the resolution, known as H.J.Res. 109, argues that the SEC's rule could disrupt the financial system and create uncertainty in the market. In a statement on May 8, the White House expressed its strong opposition to the joint resolution introduced in the House of Representatives that would nullify SAB 121. 

The administration said that SAB 121 was issued in response to "demonstrated technological, legal, and regulatory risks that have caused substantial losses to consumers.” It warned that “By virtue of invoking the Congressional Review Act, it could also inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets including financial stability. 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.”

This stance puts the Biden administration at odds with many in the crypto industry and some members of Congress from both parties. Representative Mike Flood, the Republican sponsor of the resolution to overturn SAB 121, criticised SEC Chair Gary Gensler for using "what is supposed to be mundane staff accounting guidance to essentially freeze out large publicly traded banks from taking custody of digital assets."

Representative Patrick McHenry, who serves as the Republican chairman of the House Financial Services Committee, also criticised SAB 121 as a "massive deviation" from how banks traditionally treat customer assets. Representative Maxine Waters, the committee's ranking Democratic member, argued the resolution went too far and was driven by special interests. 

Despite this bipartisan opposition, the Biden administration appears determined to defend the SEC's crypto accounting rule. The White House said that if the resolution reached the president's desk, "he would veto it." 

This sets the stage for a potential showdown between the executive and legislative branches over the future of cryptocurrency regulation in the United States. The outcome could have far-reaching implications for the capability of traditional financial institutions to participate in the digital asset ecosystem.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash