President Biden has vetoed a bill that would have repealed a staff accounting bulletin from the Securities and Exchange Commission requiring custodians to list cryptocurrencies on their balance sheets as liabilities.
Released in 2022, SAB 121, among other things, said those responsible for safeguarding the crypto-assets of their users should list these digital tokens as a liability on their balance sheets. The SEC said this is because the technological mechanisms supporting how crypto-assets are issued, held or transferred, as well as legal uncertainties regarding holding crypto assets for others, create significant increased risks to an entity, including an increased risk of financial loss.
Banks and other stakeholders objected to the measure and urged a repeal, as on-balance sheet treatment has discouraged or outright prevented highly regulated banking organizations from providing a custodial solution for digital assets. Critics further said the SEC's definition of a digital asset was overly broad and was having a chilling effect on developing responsible use cases for distributed ledger technology. There were also objections based on procedure, with some saying staff accounting bulletins are not designed to make new rules but clarify existing ones, although the SEC and GAO disagreed.
In light of these objections, the House passed a joint resolution in May on a 228-182 vote that would repeal the applicability of the SEC staff accounting bulletin requiring custodians to list cryptocurrencies on their balance sheets as liabilities (see previous story). The Senate passed the bill just a few days later. In both cases, the White House defended the measure, saying it would protect investors from demonstrable risks in the crypto market, and said repealing it would introduce financial instability. Consequently, it said President Biden would veto the bill if it came across his desk.
Once that happened, he did just that.
"SAB 121 reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto-assets," said the president. "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."
Currently, supporters of the bill do not have enough votes to override the veto.
