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Biden vetoes bipartisan bid to abolish SEC guidance on crypto custody

Biden vetoes bipartisan bid to abolish SEC guidance on crypto custody
Snapshot
US President Joe Biden casts a veto. Credit: Darren Joseph
By
Mike Millard
1 June 2024 at 07:42
  • Biden vetoes Republican-led, bipartisan resolution.
  • Wall Street banking groups had lobbied against the veto.
  • Biden 'eager' to work with Congress on regulatory framework.

US President Joe Biden on Friday afternoon vetoed a House Joint Resolution that would have abolished the Securities and Exchange Commission’s Staff Accounting Bulletin 121, which critics say makes it difficult for crypto companies to work with banks.

The Republican-led resolution had passed through both houses of Congress with bipartisan support and had been endorsed by Wall Street.

“This reversal of the considered judgement of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices,” Biden said in a statement released by the White House.

He added: “My administration will not support measures that jeopardise the well-being of consumers and investors. Appropriate guardrails that protect consumers and investors are necessary to harness the potential benefits and opportunities of crypto-asset innovation.”

The SEC published SAB 121 in March 2022. It advises any entity safeguarding crypto assets on behalf of others to put them on its balance sheet as if it owned them, DL News reported earlier.

They don’t have to do this with traditional assets such as stocks.

Custodians must hold capital reserves to offset risky on-balance sheet items so they can fund their positions in case of default. That’s expensive: The capital they’re forced to hold in reserve could be leveraged for revenue.

SAB 121 isn’t clear on how much banks would have to hold against crypto assets, or whether the SEC would even enforce it — it’s not a rule, so much as it is high-level guidance.

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Uncertainty

Still, the uncertainty has reportedly deterred a number of big firms — including BNY Mellon, State Street, and Nasdaq — from entering this business.

Wall Street banking and policy institutions had lobbied the administration in favour of the resolution with a letter, saying: “Precluding regulated banking organisations from effectively providing digital asset safeguarding services at scale harms investors, customers, and ultimately the financial system.”

Still, the White House news release on the veto went on to say that the administration is “eager to work with the Congress to ensure a comprehensive and balanced regulatory framework for digital assets.”

Crypto market movers

  • Bitcoin is down 1.05% today at $67,576.25.
  • Ethereum is up 1.03% today at $3,783.16.

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