Regulation
Attempt to Overturn Biden’s Veto of SAB 121 Cryptocurrency Bill Fails
The House fell short of the two-thirds threshold needed to override President Joe Biden’s veto of a resolution repealing Staff Accounting Bulletin 121, which requires banks to hold cryptocurrencies in custody on their balance sheets as liabilities.
Graeme Sloan/Bloomberg
WASHINGTON — The House failed to overturn President Joe Biden’s veto of a measure that would have overridden Securities and Exchange Commission guidelines prevent banks from offering cryptocurrency custody services.
SEC Accounting Bulletin 121 requires companies, including banks, to hold crypto assets for their customers on their balance sheets as liabilities. For larger banks, this means it is not efficient to open or expand a cryptocurrency custody business.
Both the House and the Senate, with some bipartisan support, passed a Congressional Review Act resolution that would have repealed the directive. Biden then vetoed the resolution.
On Thursday, the House failed to override that veto. The House, which needed a two-thirds majority, voted 228-184.
Twenty-one Democratic lawmakers voted to override the veto, breaking with Biden. That’s the same number who voted to override the guidance initially.
“A bipartisan CRA that passes both houses?” Rep. Patrick McHenry, R-N.C., chairman of the House Financial Services Committee, asked the House floor Wednesday. “This is a mandate from the Americans we represent. Despite all the recent progress and bipartisan agreement, President Biden has vetoed the first digital asset-specific legislation ever passed by the House and Senate.”
The measure continued to face opposition from most Democratic lawmakers. Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Committee, argued on the House floor that the CRA approach was overly broad because it would prevent the SEC from issuing another rule on the same topic in the future.
“A special interest group representing large custodial banks has provided the SEC with targeted amendments to SAB 121 that will avoid the jackhammer effect of this legislation,” Waters said. “I understand that the SEC may be close to reaching agreement on these amendments, which would ensure that well-regulated entities, such as custodial banks, can offer cryptocurrency custody services consistent with SAB 121.”
In a new letter to the House Wednesday, banking industry trade associations urged lawmakers to vote to override Biden’s veto.
“SAB 121 represents a significant departure from the longstanding accounting treatment for assets in custody and threatens the industry’s ability to provide its customers with safe and reliable custody of digital assets,” the American Bankers Association, the Bank Policy Institute, the Financial Services Forum, and the Securities Industry and Financial Markets Association said in the letter. “Other non-bank digital asset platforms subject to SAB 121 are not required to meet the same capital, liquidity, or other prudential standards as banks and therefore do not address the economically prohibitive implications of SAB 121.”