President Biden vetoes crypto custody bill

President Joe Biden has vetoed H.J.Res. 109, a congressional resolution that would have overturned the Securities and Exchange Commission’s current approach to banks and crypto.

Specifically, the resolution targeted the SEC’s Staff Accounting Bulletin 121, which presents guidance around how banks can handle customers’ crypto assets — in effect, they must treat those assets as liabilities. Banking groups have criticized this approach as making it prohibitively expensive for them to handle crypto, while regulators argue it’s necessary to protect investors, particularly after the collapse of high-profile crypto companies like FTX.

“SAB 121 reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto-assets,” Biden said in a statement. “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.”

Biden went on to say his administration “will not support measures that jeopardize the well-being of consumers and investors.”

H.J.Res. 109 was passed with mostly Republican support — but 21 Democrats supported the resolution in the House, and Majority Leader Chuck Schumer was among the Democrats who supported it in the Senate.

The president had previously indicated his intention to veto the resolution, while Representative Mike Flood (the Republican congressman who sponsored H.J.Res. 109 in the House) argued Biden should reconsider given the “overwhelming opposition to SAB 121.”

Organizations opposing SAB 121 include the American Bankers Association and other financial industry lobbying groups, as well as the crypto industry advocacy group Stand With Crypto.

“SAB 121 effectively precludes regulated banking organizations from offering digital asset custody at scale since it treats the assets as if they are owned rather than simply custodied by a banking organization,” the ABA and other industry groups said in an open letter to President Biden.

The White House’s announcement left the door open to further negotiations around crypto regulation.

“My Administration is eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, which will promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system,” Biden said.