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

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."

Read More: U.S. Sen. Wyden: House 'Right' to Pursue Crypto Bill, Late in Session for More Progress

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.