President Biden recently vetoed H.J. Res. 109, a bipartisan bill intended to overturn the SEC's Staff Accounting Bulletin No. 121 (SAB 121). SAB 121 mandates that financial institutions holding customers' digital assets must list those assets on their balance sheets. Critics argue this requirement creates significant operational and financial burdens for these institutions and potentially exposes customers' assets to risks in bankruptcy situations.
The bill, introduced by Representative Mike Flood and supported by figures like Senator Cynthia Lummis, aimed to remove these regulatory requirements, arguing they hinder financial innovation and create unnecessary risks for consumers. Proponents of the bill claimed that SAB 121's requirements make it prohibitively expensive for firms to provide crypto custody services, thereby stifacing industry growth and innovation.
Biden's administration, however, defended SAB 121, stating that it is essential for investor protection and market transparency. The administration argued that maintaining SAB 121 ensures that the SEC can effectively safeguard the financial system and protect investors from the inherent risks associated with digital assets.