The United States House of Representatives fell short of the two-thirds majority needed to override President Joe Biden’s veto of a bipartisan resolution that sought to overturn SEC Staff Accounting Bulletin 121, leaving in place a controversial rule that requires banks and other financial institutions to hold custodied crypto assets on their balance sheets. The vote on July 11 marks a significant setback for the cryptocurrency industry’s efforts to reshape the regulatory framework governing digital asset custody in the United States.
The final tally stood at 228 votes in favor of overriding the veto and 184 against, with 21 Democrats crossing party lines to support the override. Despite the strong bipartisan showing, the count fell well short of the 290 votes required to achieve the two-thirds supermajority under the Congressional Review Act.
TL;DR
- The House voted 228-184 to override Biden’s veto of SAB 121 repeal, falling short of the required two-thirds majority
- 21 Democrats joined all voting Republicans in supporting the override attempt
- SAB 121 requires custodial entities to hold crypto assets on their balance sheets, increasing capital and compliance costs
- House Financial Services Chairman Patrick McHenry called SAB 121 one of the most glaring examples of SEC regulatory overreach
- Bitcoin holds at $57,344 and Ethereum at $3,100 as markets digest the legislative outcome
Understanding SAB 121
Staff Accounting Bulletin 121, issued by the SEC on March 31, 2022, represented a significant departure from decades of generally accepted accounting treatment for custodied assets. Under the bulletin, reporting entities that perform custodial duties in relation to crypto assets must hold those assets on their balance sheets rather than treating them as off-balance-sheet items, as had been the standard practice for traditional custodial arrangements.
The practical effect is substantial. Banks and other financial institutions seeking to offer crypto custody services face increased capital requirements, liquidity obligations, and other compliance costs under the existing prudential regulatory framework. Industry advocates argue that these additional burdens effectively price traditional financial institutions out of the crypto custody market, limiting consumer choice and concentrating risk among a smaller number of specialized providers.
The Legislative Journey
The effort to overturn SAB 121 began with H.J. Res. 109, a joint resolution introduced under the Congressional Review Act, which allows Congress to disapprove of certain agency rules. On May 8, 2024, the House passed the resolution with all 207 voting Republicans and 21 Democrats supporting it. The Senate followed suit, with 11 Democrats joining all Republicans in a rare show of bipartisan agreement on cryptocurrency policy.
The strong congressional support prompted a direct response from the White House. On May 31, 2024, President Biden vetoed the bill, arguing that the resolution would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues. In his veto message, Biden stated that SAB 121 reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto assets, and that overturning it through the Congressional Review Act risks undercutting the SEC’s broader authorities regarding accounting practices.
The Override Vote
When the override vote came to the House floor on July 11, the outcome was largely predictable. The 228 votes in favor represented essentially the same coalition that had passed the original resolution — all voting Republicans plus the same 21 Democrats who had broken ranks in May. Without additional Democratic defections, reaching the two-thirds threshold was mathematically impossible.
House Financial Services Committee Chairman Patrick McHenry, a Republican from North Carolina and a leading voice on crypto regulation, was blunt in his assessment. He stated that SAB 121 is one of the most glaring examples of the regulatory overreach that has defined Gary Gensler’s tenure at the SEC, arguing that it limits consumers’ options to safely custody their digital assets, upends decades of bank custody practices, and increases concentration risk.
On the other side, ranking Democrat Maxine Waters indicated that the SEC may be close to reaching an agreement on modifications to SAB 121, suggesting that well-regulated entities could receive accommodations under a revised framework. Her comments offered a potential off-ramp for the standoff, though no formal changes to the bulletin have been announced.
Industry Reaction and Market Impact
The failed override drew sharp criticism from cryptocurrency industry groups, which had invested significant lobbying resources in the effort to repeal SAB 121. The bulletin has been a consistent point of friction between the digital asset sector and regulators, with industry participants arguing that it effectively prevents highly regulated banks from offering crypto custody services — a result that runs counter to the goal of bringing cryptocurrency into the regulated financial mainstream.
The broader market showed limited immediate reaction to the vote. Bitcoin continued to trade around $57,344, while Ethereum held near $3,100. Market participants appeared to have already priced in the expected outcome, with attention shifting to other catalysts including the anticipated launch of spot Ethereum ETFs and ongoing Bitcoin sales by the German government.
The failed override also comes against a backdrop of heightened regulatory activity. On the same day as the vote, the SEC separately announced the closure of its investigation into Paxos over the BUSD stablecoin, a move widely interpreted as a win for the crypto industry. The juxtaposition highlighted the complex and sometimes contradictory nature of the current regulatory environment for digital assets in the United States.
Why This Matters
The failure to override Biden’s SAB 121 veto underscores the challenges facing the cryptocurrency industry in its push for regulatory reform through legislative channels. Despite unprecedented bipartisan support for overturning an SEC rule, the two-thirds threshold required for a veto override proved insurmountable. The result means that banks and financial institutions will continue to face elevated compliance costs for crypto custody services, potentially slowing the integration of digital assets into the traditional financial system. However, the strong bipartisan vote sends an unmistakable signal to regulators that Congress is paying close attention — and that future SEC accounting guidance on crypto assets may face similar legislative scrutiny.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency investments carry significant risk. Always conduct your own research before making investment decisions.