Biden Vetoes Bill to Undercut SEC’s Crypto Authority

In a move that underscores the ongoing regulatory tension surrounding cryptocurrencies, President Joe Biden has vetoed a bill designed to limit the Securities and Exchange Commission’s (SEC) oversight of the crypto industry. The bill sought to overturn an SEC bulletin that set stringent accounting standards for firms that custody cryptocurrency.

The SEC Bulletin and Congressional Response

The SEC’s staff accounting bulletin, known as SAB 121, requires financial institutions holding crypto assets to record them as liabilities on their balance sheets. This measure, according to critics, complicates the involvement of financial institutions with crypto companies by imposing burdensome accounting practices. The bill to repeal SAB 121 passed both the House and Senate, with support from a bipartisan group of lawmakers who argued that the bulletin hindered innovation and financial freedom.

The House passed the measure with a vote of 228-182, and the Senate followed suit with a vote of 60-38. The support from several Democrats, including Senate Majority Leader Chuck Schumer, highlighted the broad concern over the SEC’s approach to cryptocurrency regulation. However, overturning a presidential veto requires a two-thirds majority from both houses of Congress, a significant hurdle given the current political landscape.

Biden’s Justification and Industry Reaction

In his veto message, President Biden emphasized the importance of maintaining appropriate guardrails to protect consumers and investors. He stated, “This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices.” Biden underscored his administration’s commitment to harnessing the potential benefits of crypto-asset innovation while ensuring the well-being of consumers and investors.

The veto was met with criticism from the cryptocurrency industry. The Blockchain Association expressed disappointment, stating that the administration overruled bipartisan majorities in Congress who recognized the harm created by SAB 121. Cody Carbone, Chief Policy Officer at the Digital Chamber, described the veto as “a slap in the face to innovation and financial freedom.”

Moe Vela, a senior advisor to Unicoin and former senior advisor to Biden, commended the administration’s engagement with cryptocurrency thought leaders but criticized the decision to veto the bill. He highlighted the importance of integrating crypto into the financial system and urged both presidential candidates to address the future of cryptocurrencies.

Broader Implications for the Crypto Industry

The veto has significant implications for the regulatory landscape of cryptocurrencies in the United States. It underscores the Biden administration’s cautious approach to crypto regulation, prioritizing consumer protection and financial stability over rapid innovation. This stance may lead to increased scrutiny and regulatory challenges for crypto firms, particularly those involved in custodial services.

The decision also reflects the broader debate over the role of federal agencies in regulating emerging technologies. The SEC, under Chair Gary Gensler, has taken a proactive approach to regulating cryptocurrencies, arguing that many digital assets fall under existing securities laws. This approach has faced pushback from the crypto industry and some lawmakers who believe that the SEC’s actions stifle innovation and limit financial inclusion.

The veto could prompt crypto firms to seek more clarity and engagement from regulators to address their concerns. It may also lead to further legislative efforts to balance innovation with regulatory oversight. As the crypto market continues to grow and evolve, the interplay between regulation and innovation will remain a critical factor in shaping the future of the industry.

Conclusion

President Biden’s veto of the bill aimed at limiting the SEC’s authority over cryptocurrency regulation marks a pivotal moment in the ongoing regulatory debate. While the decision underscores the administration’s commitment to consumer protection, it also highlights the challenges and tensions facing the crypto industry as it navigates the complex regulatory landscape. As stakeholders continue to advocate for balanced and clear regulations, the future of crypto regulation in the U.S. will be closely watched by industry participants and policymakers alike.