Lawmakers failed to override President Joe Biden’s veto of a resolution that would have overturned a controversial Securities and Exchange Commission (SEC) cryptocurrency accounting bulletin, better known as SAB 121.
The House voted 228–184 for the resolution to overturn the president’s veto, with 21 Democrats joining 207 Republicans. However, the lower chamber fell short of the two-thirds majority threshold necessary to reverse the veto.
Congress was scheduled to vote on the resolution on July 10, but it was postponed after President Biden penned a letter to the House.
The SEC’s accounting guidelines, introduced in May 2022, would mandate financial institutions that custody cryptocurrency assets to identify crypto holdings as liabilities on their balance sheets.
Twenty-one Democrats in the lower chamber joined their Republican counterparts, while 11 Democrat senators voted to end the SEC rule.
Days following the vote, President Biden said he vetoed the bill because “he will not support measures that jeopardize the well-being of consumers and investors.”
“This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices,” President Biden wrote in a May 31 letter to Congress. “Appropriate guardrails that protect consumers and investors are necessary to harness the potential benefits and opportunities of crypto-asset innovation.”
Overturning the president’s veto would return “commonsense to American digital asset policy” rather than “play politics and side with power-hungry bureaucrats,” said House Financial Services Committee Chairman Patrick McHenry (R-N.C.)
“SAB 121 is one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC,” Mr. McHenry said on the House floor on July 10. “It limits consumers’ options to safely custody their digital assets, upends decades of bank custody practices, and increases concentration risk.”
Rep. Mike Flood (R-Neb.) told his congressional colleagues that SAB 121 is not a political issue but “is simply a bad regulation.”
“No matter what your feelings are about cryptocurrency, the SEC should not be writing bank custody rules and shouldn’t be overstepping their authority to do it,” Mr. Flood stated.
But Rep. Maxine Waters (D-Calif.) warned that overturning the president’s veto would “undermine the Securities and Exchange Commission’s ability to protect people who buy cryptocurrency.”
“This resolution is part of a long list of efforts by industry and its allies to attack the good work of the SEC, which has made significant progress in protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation,” Ms. Waters said.
SEC officials have pushed back against SAB 121 criticisms.
SEC Chair Gary Gensler explained at an American Bar Association event in December 2023 that SAB 121 “basically addresses whether liabilities should be on balance sheets.”
“What we have found actually in bankruptcy court, time and again, many times now, that in indeed, bankruptcy courts have said that crypto assets are not bankruptcy remote,” Mr. Gensler said. “So, the staff, as they have done over 50 years, did really good work.”
Ahead of the House deliberations, White House officials and members of Congress participated in a crypto roundtable discussion with various industry leaders, including Ripple CEO Brad Garlinghouse.
Despite discussions, Mr. Garlinghouse wrote on X that the majority of Democrats “continue to enable Gensler’s unlawful war on crypto.”
Chamber of Progress, a center-left tech industry policy coalition, urged President Biden to support bipartisan legislation to create a “crypto-positive” environment for digital assets.
“With 18 million voters and an election at stake, now is the time to speak out in support of bipartisan progress regulating digital assets,” said Kyle Bligen, the director of financial policy, in a July 9 letter to President Biden.
