Wall Street Asks Biden Not to Veto Congress' Rejection of SEC Crypto Policy

Lobbying groups for the U.S. banks sent President Joe Biden a letter asking him to change his mind on his threat to veto the congressional effort to overturn SAB 121. Members of Congress did, too.

AccessTimeIconMay 31, 2024 at 9:26 p.m. UTC
Updated May 31, 2024 at 10:56 p.m. UTC
  • The groups that lobby for big-bank interests in Washington asked the White House to step back from its stated intention to kill Congress' effort to cancel a controversial Securities and Exchange Commission crypto policy.
  • Two of the digital assets sector's biggest allies on Capitol Hill also sent a similar request to the president.

In a rare lobbying overlap with crypto world, Wall Street banks and members of Congress are asking President Joe Biden to reverse course on his vow to veto the U.S. congressional resolution to overturn the U.S. Securities and Exchange Commission's (SEC) crypto accounting policy.

In recent bipartisan votes that saw many members of Biden's party rebuff his opposition, Congress decided to reject SEC's Staff Accounting Bulletin No. 121 (SAB 121) – a controversial accounting standard that would require banks to treat customers' digital assets differently than other assets, demanding they be kept on a bank's balance sheet. Crypto companies have argued this threatens their ability to do business with banks, and the bankers agree.

"SAB 121 effectively precludes regulated banking organizations from offering digital asset custody at scale since it treats the assets as if they are owned rather than simply custodied by a banking organization," according to a letter to Biden on Friday, signed by several groups including the American Bankers Association and Financial Services Forum. "Institutions that are forced to record custodied digital assets on balance sheet are subjected to higher capital, liquidity, and other prudential requirements, unlike their non-bank competitors."

The letter came the same day Sen. Cynthia Lummis (R-Wyo.) and Rep. Patrick McHenry (R-N.C.) published their own letter to Biden, dated May 30, similarly asking him to not veto, or at least "work with the SEC to rescind the staff guidance."

"Rescinding SAB 121 is well within the SEC’s authority and there is ample precedent for revisiting a staff accounting bulletin," the letter said. "In fact, most staff accounting bulletins over the last three decades have been revisions and rescissions of prior guidance."

Seven other representatives signed onto the letter, including Reps. Mike Flood (R-Neb.) and Wiley Nickel (D-N.C.), the sponsors of the resolution.

Biden's threat to veto the resolution noted that erasing the rule under the Congressional Review Act would mean nothing similar can be implemented by the SEC in the future, which would "inappropriately constrain the SEC’s ability to ensure appropriate guardrails and address future issues related to crypto-assets including financial stability."

The group of 11 Senate Democrats who went against the president included Majority Leader Chuck Schumer (D-N.Y.) and Sen. Ron Wyden (D-Ore.), the chairman of the Senate Finance Committee, who said at CoinDesk's Consensus 2024 on Friday that the SEC's policy "basically sets up a different standard for crypto than everybody else has in the financial sector."

Last week, SEC Chair Gary Gensler sought to explain SAB 121 as an attempt for the regulator to respond to the turmoil and investor harms happening in crypto during 2022. He argued it was "just" a staff bulletin meant to address the fact that the failures of collapsing crypto firms were treating customer assets as part of their bankruptcy estates.

Biden has until Monday to make a final decision on whether to veto the resolution or not.

Edited by Nikhilesh De.


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.

Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.