President Joe Biden sent a letter to the House of Representatives on May 31, 2024, announcing his veto of the Republican-led H.J.Res. 109. The resolution seeks to overturn the U.S. Securities and Exchange Commission’s (SEC) Accounting Bulletin No. 121 (SAB 121), which deals with accounting responsibilities for companies that have custody of crypto assets. Biden's veto was intended to underscore his commitment to consumer and investor protections.
("Custody should be considered a corporate liability" The U.S. House of Representatives passed the SEC cryptocurrency accounting rule SAB 121, and the industry rebounded)
What is SAB 121? Importance of SAB 121
SAB 121, Staff Accounting Bulletin No. 121, was issued by the U.S. Securities and Exchange Commission (SEC) in March 2022 to provide guidance on the accounting and disclosure obligations of entities that have custody of crypto assets for users of their platforms. The advisory sets out points that require special consideration in financial reporting in response to the unique risks involved with crypto-assets, such as technical, legal and regulatory uncertainties.
Under SAB 121, entities with custodial responsibilities for crypto-assets must recognize the custodial responsibility and corresponding assets on their balance sheets and measure them at fair value. This requirement applies regardless of whether the custodial activities are performed directly by the entity or through an agent (such as a subcustodian).
Simply put, cryptocurrency companies that host user assets, such as FTX and Coinbase, should include user assets as liabilities in their accounting reports. Otherwise, as in the case of FTX, the user's crypto assets are not regarded as liabilities by the company at all, and the retroactive claims will be weaker than other priority creditors.
Congress expands power to intervene, Biden insists on opposition
The Republican-led H.J.Res. 109 seeks to use the Congressional Review Act to limit the SEC’s ability to put in place appropriate safeguards and respond to future issues. President Biden believes that such a reversal of the SEC's judgment could undermine the SEC's authority over accounting practices, negatively impacting market stability and investor protection.
Biden administration: Prioritize not jeopardizing consumer safety
Biden has made clear that his administration will not support any measures that endanger the well-being of consumers and investors. He emphasized that appropriate safeguards are essential to take advantage of the potential benefits and opportunities presented by cryptoasset innovation. The Biden administration hopes to work with Congress to build on existing authorities to ensure a comprehensive and balanced regulatory framework for digital assets to promote responsible digital assets and payments innovation and solidify U.S. leadership in the global financial system status.
This article Biden uses the presidential veto! Prevent Congress from expanding its power to interfere with the SEC: Adhering to SAB 121 accounting principles can protect investors. First appeared on Chain News ABMedia.
