In a move that has sent ripples through both Wall Street and the cryptocurrency industry, President Joe Biden vetoed House Joint Resolution 109 on May 31, 2024, blocking a bipartisan congressional effort to repeal the Securities and Exchange Commission’s controversial Staff Accounting Bulletin 121. The decision preserves an SEC guideline that critics argue makes it prohibitively expensive for traditional banks to offer crypto custody services, while the administration insists it is necessary for consumer protection and financial stability.
TL;DR
- President Biden vetoed H.J.Res. 109 on May 31, blocking repeal of SEC’s SAB 121 crypto custody rule
- SAB 121 requires banks holding crypto assets for customers to record them as liabilities on balance sheets
- Both the House and Senate passed the repeal resolution with bipartisan support
- Crypto industry leaders call the veto a setback for innovation and financial freedom
- Over 37,000 BTC withdrawn from exchanges in the 72 hours surrounding the decision
What Is SAB 121 and Why Does It Matter?
Staff Accounting Bulletin 121, issued by the SEC, fundamentally changed how financial institutions handle cryptocurrency custody. Under the guidance, banks and other financial institutions that hold crypto assets on behalf of their customers must record those assets as liabilities on their balance sheets. This is a stark departure from how traditional asset custody works—when a bank holds stocks or bonds for clients, those assets do not appear as liabilities on the bank’s books.
The SEC argues that crypto assets present unique risks, including the potential for hacks, fraud, and operational failures, and that recording them as liabilities ensures institutions maintain adequate capital buffers to protect customers. The guidance was designed to enhance transparency and accountability in an industry that has seen numerous high-profile collapses, including the spectacular implosion of FTX in November 2022.
Critics, however, contend that the requirement is punitive and effectively prevents banks from offering crypto custody services by making it too capital-intensive. The result, they argue, is that crypto custody gets pushed to less regulated, less secure platforms—precisely the outcome SAB 121 was designed to prevent.
A Bipartisan Rebuff
What makes Biden’s veto particularly notable is the broad congressional support behind the repeal effort. The House of Representatives and the Senate both passed H.J.Res. 109 with significant bipartisan majorities, a rare display of cross-party agreement on cryptocurrency regulation. The resolution was sponsored by Representative Mike Flood and supported by Senator Ron Wyden, among others.
Lawmakers argued that SAB 121 was not formally adopted through proper rulemaking procedures but rather issued as staff guidance, yet its practical impact is equivalent to a binding regulation. By invoking the Congressional Review Act, Congress was attempting to formally overturn the SEC’s guidance and prevent similar rules from being issued in the future without going through the full rulemaking process.
Biden’s veto message emphasized the administration’s commitment to consumer protection and argued that overturning SAB 121 would undermine the SEC’s ability to regulate the rapidly evolving crypto market. The President noted that the SEC’s guidelines were developed to address demonstrated risks and ensure that financial institutions maintain appropriate safeguards for digital assets. He also warned that invoking the Congressional Review Act could restrict the SEC’s broader regulatory authority beyond just crypto custody.
Industry Reacts With Frustration
The cryptocurrency industry’s response to the veto has been swift and critical. The Blockchain Association expressed disappointment, noting that bipartisan majorities in both chambers of Congress recognized the harmful implications of SAB 121 and had taken legislative action to address them.
Brad Garlinghouse, CEO of Ripple, described the veto as a significant setback for the crypto industry at a critical juncture. With the SEC having recently approved spot Ethereum ETFs and the broader digital asset market showing signs of renewed institutional interest, the timing of the veto feels particularly pointed to many industry participants.
Cody Carbone, Chief Policy Officer at the Chamber of Digital Commerce, called the decision a blow to financial innovation and freedom, arguing that the United States risks falling behind other jurisdictions in developing clear, workable crypto regulation frameworks. The European Union, for instance, is moving forward with its Markets in Crypto-Assets regulation, which provides a comprehensive framework for digital asset custody and trading.
Market Impact and the Bigger Picture
The veto comes against a backdrop of heightened activity in the Bitcoin market. In the 72 hours surrounding the decision, over 37,000 BTC was withdrawn from cryptocurrency exchanges, according to data shared on Binance. While it is difficult to attribute this movement solely to the SAB 121 veto—options expiries and ETF-related positioning are also contributing factors—it does suggest that investors are increasingly moving assets to self-custody solutions amid regulatory uncertainty.
Bitcoin traded at approximately $67,491 on the day of the veto, according to CoinMarketCap data, with Ethereum at $3,760. Total cryptocurrency market capitalization held steady at approximately $2.68 trillion. The market’s muted reaction to the veto suggests that the decision was largely anticipated, as the administration had previously signaled its intention to block the resolution.
The closure of BlockFi’s web platform on the same day serves as a sobering reminder of the risks that regulators cite in defending SAB 121. BlockFi, which declared bankruptcy in November 2022, finally shut down its customer platform on May 31, 2024, bringing a formal end to one of the most prominent casualties of the 2022 crypto credit crisis.
Why This Matters
The SAB 121 veto is about far more than accounting standards—it is a flashpoint in the broader debate over how digital assets should be regulated in the United States. By preserving a rule that effectively bars traditional banks from offering crypto custody, the administration is forcing the industry into a regulatory gray zone where innovation continues but consumer protections remain inconsistent. The fact that Congress marshaled bipartisan support to repeal the rule, only to be overridden by a presidential veto, underscores how deeply divided policymakers remain on crypto regulation. For Bitcoin investors, the practical impact is that institutional custody solutions from major banks remain elusive, and self-custody or specialized crypto custodians continue to be the primary options for safeguarding digital assets.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry high risk, and readers should conduct their own research before making investment decisions.
bipartisan support in both chambers and biden still vetoed it. tells you where the administration stands on crypto custody
SAB 121 forcing banks to count custodial crypto as liabilities is insane. no other asset class gets this treatment
the consumer protection argument is so thin. banks hold way riskier assets on their books without this rule
the whole point of SAB 121 is to make custody so expensive that banks dont bother. its regulation by friction
counting custodial crypto as a liability while every other asset class gets normal treatment. this was never about consumer protection, it was about keeping banks away
37k BTC withdrawn from exchanges in 72 hours. people voting with their wallets, literally
37k btc moved in 72 hours over a custody rule. imagine what happens when they try actual bans
the fact that both chambers passed it with bipartisan support and it still got vetoed tells you everything. the admin does not care what congress thinks about digital assets
Nadia K. and 37K BTC withdrawn from exchanges in 72 hours was the markets response. people literally pulled their coins off custodians because the rule makes custody unreliable. unintended consequences
bipartisan repeal passing both chambers and still getting vetoed. the executive branch does not care what congress thinks about crypto