• The Biden administration said it would veto an attempt to overturn the SEC’s Staff Accounting Bulletin 121 (SAB 121)
• The House of Representatives is scheduled to vote on a resolution to overturn SAB 121 on May 8
• SAB 121 requires financial institutions that safeguard customer crypto assets to hold those assets on their balance sheets
The Biden administration recently announced its opposition to a Congressional effort to repeal a controversial SEC accounting rule affecting the crypto industry. This potential veto sets the stage for a clash between the White House and crypto-friendly lawmakers.
Background on the SEC Rule
In April 2022, the SEC released Staff Accounting Bulletin No. 121 (SAB 121), which requires companies handling crypto assets to account for them on their balance sheets. The rule means banks must set aside capital for crypto holdings, making it cost-prohibitive to provide crypto custody services.
The SEC said the rule protects investors, but it was introduced without public comment. Crypto industry participants argue it will limit consumer access to regulated crypto services.
Congressional Pushback
In response, Congressional representatives introduced House Joint Resolution 109 to overturn SAB 121 using the Congressional Review Act.
The House Financial Services Committee Chair Patrick McHenry supports the repeal effort. He argues the SEC overstepped its authority and failed to follow proper process in issuing SAB 121.
On May 8th, the Biden administration announced it “strongly opposes” the resolution and would recommend the president veto it if passed.
The White House Claims
The administration claims the rule provides needed oversight of the crypto industry and rescinding it would undermine investor protection efforts.
It also argues Congress should not limit the SEC’s ability to regulate crypto markets as it sees fit. The administration says overturning SAB 121 would introduce instability and uncertainty.
Potential Outcomes
The House is still expected to vote on the resolution on May 8th. If it passes, the veto threat sets up a standoff between the legislative and executive branches.
Crypto industry groups have advocated amending SAB 121 rather than fully repealing it. But the veto announcement suggests the Biden administration plans to stand firm on the rule.
The coming weeks may prove critical in determining the SEC’s ability to regulate digital assets through guidance like SAB 121 without following formal rulemaking procedures.
