Biden Vetoes Congressional Repeal of SEC Crypto Rule, Emphasizes Consumer Protection

President Joe Biden has vetoed a Congressional resolution aimed at overturning the SEC’s Staff Accounting Bulletin No. 121 (SAB 121), highlighting the Administration’s dedication to stringent financial regulations.

The resolution, which found substantial support among Republicans and some Democrats, successfully passed through both the House and Senate on May 16. Introduced in March 2022, SAB 121 mandates that financial institutions disclose customers’ digital assets. Critics argue that this regulation imposes significant operational and financial burdens on cryptocurrency firms. Senator Cynthia Lummis, a prominent backer of the resolution, contended that SAB 121 jeopardizes consumers’ assets in bankruptcy scenarios by including them on institutional balance sheets.

Following considerable opposition from crypto industry leaders and several lawmakers, Congress voted to repeal SAB 121. The House passed the repeal with 228 votes in favor and 182 against, followed by the Senate’s 60-38 vote. Despite these numbers, they were insufficient to override a presidential veto.

In his veto statement, Biden emphasized his Administration’s commitment to protecting consumers and investors. “By virtue of invoking the Congressional Review Act, this Republican-led resolution would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues. This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices. My Administration will not support measures that jeopardize the well-being of consumers and investors”, Biden stated.” Biden declared. Responses to Biden’s veto have been divided within the crypto community. Some see it as essential for investor protection, while others perceive it as an obstacle to financial innovation.

SEC actions that prevent highly regulated US financial firms from custodial services for Bitcoin hinder financial innovation and competitiveness. This could drive businesses to relocate to countries with more favorable regulations, resulting in a loss of capital, talent, and technology for the US. For American citizens, these restrictions limit access to financial innovations and investment diversification, putting them at a disadvantage compared to those in other countries.

Despite the veto, Biden signaled his openness to collaborating with Congress on new digital asset market legislation, emphasizing the necessity of protecting investors. This decision underscores the ongoing debate over how to regulate the crypto industry, balancing innovation with consumer safety.