U.S. House to Vote on Overriding Biden’s Veto of Crypto Custody Rule

The U.S. House of Representatives is set to vote next week on potentially overturning President Joe Biden’s veto of a resolution to nullify the controversial Staff Accounting Bulletin 121 (SAB 121). This vote, scheduled for Tuesday or Wednesday, marks a critical moment in the ongoing debate over cryptocurrency regulation and banking practices in the United States.

SAB 121, issued by the Securities and Exchange Commission (SEC) in March 2022, requires SEC-reporting entities custodying cryptocurrencies to record these holdings as both assets and liabilities on their balance sheets. The rule has faced significant opposition from the crypto industry and some lawmakers, who argue it creates barriers for banks to provide custody services for digital assets.

In May, both the House and Senate passed a resolution to overturn SAB 121 with bipartisan support. The House voted 228-182 in favor, while the Senate approved it 60-38. However, President Biden vetoed this resolution, citing concerns about consumer and investor protection.

To override the President’s veto, a two-thirds majority is required in both chambers of Congress. This presents a significant challenge, as the initial votes fell short of this threshold. Alexander Grieve, who handles government affairs at venture capital firm Paradigm, described it as a “steep hill to climb but not impossible.”

The potential impact of SAB 121 on the financial sector is substantial. Critics argue that it could prevent American banks from custodying cryptocurrency exchange-traded products at scale, potentially creating a “concentration risk” by shifting control to non-bank entities. This concern has intensified following the approval of spot Bitcoin ETFs, as no major U.S. banks are currently serving as custodians for these products.

The upcoming vote reflects the growing importance of cryptocurrency regulation in U.S. politics. As the 2024 presidential election approaches, both major parties are paying increased attention to digital asset issues.