In a move that has stirred significant debate, President Joe Biden has exercised his veto power to block the repeal of the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121. This bulletin mandates that banks must include their customers' digital assets on their balance sheets.
Earlier, both the House of Representatives and the Senate had approved a resolution to overturn SAB 121. However, President Biden, emphasizing the protection of investors and the integrity of financial regulations, chose to veto the repeal.
In his address, President Biden stated unequivocally that he would not support a resolution that jeopardizes investor welfare. He remarked, "Such a change to the SEC staff’s considered decision risks undermining the broader authority of the Commission regarding accounting practices."
He also highlighted the necessity of adequate consumer protection measures to harness the potential benefits and opportunities of cryptocurrency innovations.
Background
In May 2024, the full House and Senate voted to repeal the Staff Accounting Bulletin (SAB) 121. Specifically, the House of Representatives cast 228 votes in favor of the repeal against 182. The bill was then sent to the Senate, which also supported the House’s decision with 60 votes for the repeal. Following this, Senator Cynthia Lummis changed her avatar on X (formerly Twitter) to an image with "laser eyes," a symbol associated with Bitcoin maximalists.
Last year, the bulletin sparked controversy over concerns that it might hinder banks from safeguarding digital assets. SAB 121 requires firms that hold cryptocurrency to account for clients' crypto assets as liabilities on their balance sheets. The SEC clarified that SAB 121 is "non-binding guidance for staff" that enhances disclosure measures for investors.
"We have repeatedly seen crypto firms fail and their clients lining up in bankruptcy courts. Disclosure allows investors to assess the risk level taken by crypto custodians," a SEC spokesperson commented to The Block.
Community Reaction
The Blockchain Association, a prominent advocacy group, expressed disappointment with Biden’s decision. Digital Chamber executive Cody Carbone labeled the president’s veto a "slap in the face to innovation and financial freedom." Ripple CEO Brad Garlinghouse also voiced his opinions on the resolution.
SEC Commissioner Hester Peirce, who has been critical of the agency, pointed out that SAB 121 mandates banks to reflect customers' digital assets on their balance sheets.
In summary, President Biden’s veto of the repeal of SAB 121 has sparked significant debate and highlighted the ongoing tension between innovation in the cryptocurrency sector and the need for regulatory safeguards.
