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Biden Blocks Crypto Custody Bill

President Joe Biden has wielded his veto power against H.J.Res. 109, reshaping the Securities and Exchange Commission
June 3, 2024

In a decisive move, President Joe Biden has vetoed H.J.Res. 109, a congressional resolution aimed at overturning the SEC's current guidelines for banks handling cryptocurrency. The resolution specifically challenged the SEC’s Staff Accounting Bulletin 121, which mandates that banks treat customers’ crypto assets as liabilities. Banking groups argue this makes crypto custody prohibitively expensive, while regulators see it as a necessary measure to protect investors, especially in the wake of major crypto collapses like FTX.

"SAB 121 reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto-assets," Biden stated. He emphasized that the Republican-led resolution would unduly limit the SEC’s ability to establish proper safeguards and address future issues. Biden firmly added that his administration would not support measures that risk the well-being of consumers and investors.

Despite primarily Republican backing, H.J.Res. 109 saw bipartisan support with 21 House Democrats and Senate Majority Leader Chuck Schumer among those in favor. The president had already signaled his intention to veto the resolution, while Representative Mike Flood, the Republican sponsor, urged a reconsideration given the significant opposition to SAB 121.

Critics of SAB 121, including the American Bankers Association and the crypto advocacy group Stand With Crypto, argue that the bulletin effectively prevents regulated banks from offering large-scale digital asset custody by treating these assets as owned rather than custodied. In an open letter to Biden, these industry groups expressed their concerns, highlighting the restrictive impact of SAB 121 on the banking sector’s ability to handle digital assets.

The White House remains open to discussions on crypto regulation. Biden expressed his administration’s eagerness to collaborate with Congress to develop a comprehensive and balanced regulatory framework for digital assets. This framework aims to promote responsible development and payment innovation, reinforcing the United States' leadership in the global financial system.

This veto underscores the ongoing debate over how to best regulate the burgeoning crypto industry while ensuring investor protection and financial stability.

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