President Biden’s veto on Friday of the SAB 121 resolution is negative for banks but may have been judged to have limited political consequences. SAB 121 is the Securities and Exchange Commission’s (SEC) staff accounting bulletin preventing banks from providing digital asset custody services. A resolution to cancel SAB 121 had bipartisan support, with a vote of 228 versus 182 in Congress and 60 to 38 in the Senate.
Prior to issuing SAB 121, the SEC did not consult banking regulators. That’s despite the obvious impact on banks – we highlighted it the next day. The President exercised his veto even though the Government Accountability Office (GAO) said SAB 121 was a rule that should have received Congressional approval. Without the veto, overturning SAB 121 would prevent the SEC from issuing further rules on the topic of digital asset custody, which appears to have been a key driver behind the President’s move.
President Biden said in a White House statement, “By virtue of invoking the Congressional Review Act, this Republican-led resolution would inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues. This reversal of the considered judgment of SEC staff in this way risks undercutting the SEC’s broader authorities regarding accounting practices. My Administration will not support measures that jeopardize the well-being of consumers and investors.”
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