Biden upholds SEC guidance on cryptocurrency regulation amid industry concerns

President Joseph R. Biden Jr. vetoed House Joint Resolution 109 (H.J.Res. 109). This resolution sought to reject the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB 121), which provides guidance on accounting practices used by companies to secure cryptoassets.

President Biden emphasized the importance of SAB 121 in his decision, stating: “SAB 121 reflects the SEC staff’s considered technical views on the accounting obligations of certain companies protecting cryptoassets.” He criticized the resolution for potentially limiting the SEC’s powers and warned that it could limit the agency’s ability to deal with future difficulties and establish accurate accounting practices.

The decision comes after Congress voted to repeal cryptocurrency accounting guidelines, which require institutions to record cryptocurrency holdings as liabilities on their balance sheets. These guidelines, which are scheduled to go into effect on April 11, have been met with significant opposition from both the crypto community and lawmakers.

President Biden’s administration remains committed to protecting consumers and investors while encouraging innovation in the cryptocurrency industry. “My administration will not support measures that threaten the well-being of consumers and investors,” he said. He stressed the need to introduce regulatory barriers to ensure the safe realization of the benefits of digital asset innovation.

Despite the veto, President Biden has expressed a willingness to work with Congress to develop a sustainable regulatory framework for digital assets. He believes such a framework will promote responsible development and strengthen the United States’ leadership role in the global financial system.

Criticism is growing over the veto on cryptocurrency regulations

On social media platforms, many members of the cryptocurrency community expressed frustration and expressed the opinion that the decision stifles innovation at a critical time. The Blockchain Association, a crypto advocacy group, expressed disappointment, pointing out that the veto went against bipartisan majorities in both houses of Congress that recognized SAB 121’s potential harm.

Cody Carbone, director of policy at Digital Chamber, expressed disappointment, calling it “a slap in the face to innovation and financial freedom.” Brad Garlinghouse, Ripple’s CEO, also expressed his dissatisfaction and added: “It’s extremely disappointing from this White House – at an extremely crucial moment – to say the least.”

Analysts also weighed in on the decision, with Bloomberg’s James Seyffart suggesting it reflects a more moderate shift in the Democratic Party’s stance on cryptocurrency regulation than expected. While some expected a complete policy reversal, the veto indicates a partial shift, signaling adjustments rather than a comprehensive policy change.

Nate Geraci, president of The ETF Store and host of ETF Prime, also spoke out, describing the cryptocurrency industry as the “Wild West” due to the lack of regulation. He suggested that the government should allow reputable, regulated financial institutions to provide custody services for digital assets. Geraci further suggested that instead of limiting the SEC’s regulatory powers, the focus should be on having accredited, regulated digital asset organizations to ensure the orderly and consistent development of the industry.

President Biden’s veto of HJRes. 109 reflects the complexities and debates surrounding cryptocurrency regulation. While it signals a commitment to innovation and consumer protection, it also highlights the challenges of striking a balance between regulation and supporting growth in this rapidly evolving sector.

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