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Washington, D.C. - President Joe Biden on Friday blocked a Congressional resolution aimed at overturning the U.S. Securities and Exchange Commission's controversial crypto accounting guidance, stating that the measure would "inappropriately constrain" the agency's ability to address future issues.

In his statement, Biden asserted that using the Congressional Review Act (CRA) to roll back the SEC's Staff Accounting Bulletin 121 (SAB 121) "risks undercutting the SEC's broader authorities regarding accounting practices." The CRA allows Congress to overturn final rules issued by federal agencies but also prevents agencies from reissuing a similar rule without Congressional approval.

"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," Biden stated.

SAB 121 directs banks and other custodians to account for digital assets held in custody on their balance sheets. Some lawmakers have argued that this requirement could harm consumers by discouraging well-regulated entities from safeguarding crypto assets due to heightened capital requirements and confusing how customer assets are handled during bankruptcy proceedings.

The resolution, H.J. 109, passed the House in a 228-182 vote and the Senate in a 60-38 vote, with both votes falling mostly along party lines. However, neither vote garnered the necessary two-thirds majority to override a presidential veto.

The White House echoed concerns voiced by Democrats during the votes, asserting that using the CRA would "jeopardize the well-being of consumers and investors" by limiting the SEC's ability to issue future guidance. The administration also stated that the bulletin "reflects considered technical SEC staff views regarding the accounting obligations of certain firms that safeguard crypto-assets."

During the legislative debate, some Democrats argued that the bulletin isn't a final rule and therefore isn't subject to the CRA. The SEC has maintained that the bulletin is only guidance, though a Government Accountability Office report said the bulletin met the characteristics of a rulemaking.

The SEC did not immediately respond to a request for comment on Friday.

President Biden had committed to vetoing H.J. 109 while it was still on the House floor, expressing concerns that the measure would constrain the SEC. On Friday, a coalition of lawmakers led by Rep. Patrick McHenry, R.-N.C., and Sen. Cynthia Lummis, R.-Wyo., sent a letter urging the president to reconsider his plan to block the bill.

"Given the overwhelming bipartisan votes, we urge you to sign H.J. Res. 109 into law or work with the SEC to rescind the staff guidance," the letter stated. "Rescinding SAB 121 is well within the SEC's authority and there is ample precedent for revisiting a staff accounting bulletin. In fact, most staff accounting bulletins over the last three decades have been revisions and rescissions of prior guidance."

The bill to overturn SAB 121 is the first crypto-specific legislation to reach the president's desk, though other related legislation has seen movement recently. The Financial Innovation and Technology for the 21st Century Act, a comprehensive regulatory framework for the industry, and the CBDC Anti-Surveillance Act, a bill that would bar the Federal Reserve from issuing a digital dollar, both advanced out of the House in May.

President Biden expressed his willingness to work with Congress on future crypto policy.

"My administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, which will promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system," Biden said.