President Vetoes Congressional Resolution To Overturn The SEC’s Crypto Accounting Guidance

On May 31, 2024, President Biden vetoed a Congressional resolution to overturn the U.S. Securities and Exchange Commission’s (“SEC”) crypto accounting guidance, Staff Accounting Bulletin 121 (“SAB 121”).  

According to Law360, SAB 121 directs firms that safeguard consumer crypto to track the funds as liabilities on their balance sheets.  The guidance was criticized by crypto advocates, banking groups, and lawmakers because in their view, it “set a higher bar for crypto than for other assets by calling for institutions to hold reserves against all digital assets held in custody.”  According to Politico, detractors contended that SAB 121 could discourage banks from holding crypto assets, and that the guidance “should have gone through the SEC’s rulemaking process instead of being issued as guidance, which involves less public input.”  

The House voted 228-182 to overturn the guidance, and the Senate did the same in a 60-38 vote, invoking the Congressional Review Act (“CRA”).  The CRA allows Congress to overturn final rules issued by federal agencies and prevents agencies from reissuing similar rules without Congressional approval.  Some lawmakers argued during debate that the guidance is not a final rule and therefore not subject to the CRA, a position that the SEC maintained as well, although the Government Accountability Office found that the guidance “met the characteristics of a rulemaking.”  In a statement accompanying the veto, the President said that Congress’s use of the CRA “risks undercutting the SEC’s broader authorities regarding accounting practices,” and “would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues.”