Biden’s Surprise Veto Signals Democrats’ Crypto-Friendly Era May Have Been Wishful Thinking

Many thought the Biden administration was warming up to cryptocurrencies after the Securities and Exchange Commission (SEC) green-lighting Ethereum ETFs, while the Financial Innovation and Technology for the 21st Century (FIT 21) bill gained bipartisan support and Biden walked back a decision to veto it.

But it was short lived.

Things took a surprising turn when U.S. President Joe Biden put his foot down, vetoing legislation designed to dismantle the SEC's Staff Accounting Bulletin (SAB) No.121 rule, even as 11 Democrats voted for it, joining 48 Republicans.

This move has left the crypto community questioning Biden's and the Democratic party’s support.

“Snatching defeat from the jaws of victory,” Galaxy Digital’s Mike Novogratz said. “The [Democrats] were trying to defuse [Donald] Trump being the crypto president and were doing a great job. But this doesn’t help at all. Whoever is advising Biden needs to have his head examined.”

Prevent Misconduct

SAB 121 requires financial institutions holding crypto assets to record them as liabilities, ensuring that these entities keep a one-to-one reserve of different assets and maintain stringent internal records. The rule makes it tough and pricey for banks to offer large-scale crypto custody services.

Biden, however, insisted that this accounting guidance was necessary to protect customers and prevent financial misconduct. In a statement, he mentioned that his administration aims to work with Congress on a “comprehensive and balanced” crypto regulation framework.

It Will Cost Him

The crypto community wasn’t pleased.

"We are disappointed that Biden chose to override the bipartisan majorities in both Houses of Congress who acknowledged the harm caused by SAB 121,” Dan Spuller, vice president of the Blockchain Association said.

Anthony Scaramucci from Skybridge Capital didn’t mince his words.

“[Biden’s] position on crypto may cost him more than he realizes,” Scaramucci tweeted. “It was a really bad decision to veto that bill. Especially at this critical time.”

Crypto lawyer Pablo Enrique weighed in, saying, “With Biden vetoing even against recommendations of the banking industry, it’s hard to see that he passes anything really solid regarding crypto.”

Political Force

Of the 335.89 million U.S. residents, an estimated 50 million eligible voters are crypto enthusiasts. Crypto ownership is notably high among younger demographics, with over 40% of men aged 18-54 and more than 30% of African Americans and Hispanics owning cryptocurrencies in 2024.

The growing crypto-holding demographic, plus sizable lobbying efforts with organizations such as from Coinbase, Blockchain Association, and Crypto Council for Innovation, means the once fringe blockchain industry is becoming a powerful political force​.

Trump’s Gain

Donald Trump has tried to position himself as the pro-crypto candidate, taking a U-turn on his views on cryptocurrency. In May, Trump’s campaign accepted crypto donations, expressed support for commuting Ross Ulbricht’s sentence, and promised to keep crypto innovators in the U.S.

According to the crypto-betting marketplace Polymarket, despite his conviction on May 30, Trump is predicted to win the upcoming election in November. As of the latest data, Trump's chances of winning are at 56%, while Biden's are at 37%.

Glimmer of Hope

Still the passing of FIT 21, which aims to create a comprehensive legal and regulatory framework for cryptocurrencies and digital assets, provides a glimmer of hope for the crypto industry that it is getting more bi-partisan support.

The bill passed in the House with a vote of 279 to 136, and the Senate with a vote of 60 to 38. Notably, 135 Democrats in the House supported FIT 21, while 27 Democrats in the Senate voted in favor.

This level of Democratic support for a cryptocurrency-related bill is substantial compared to previous crypto bills.Bills like the Token Taxonomy Act (2018) and the Crypto-Currency Act of 2020 had minimal Democratic support, with fewer than 10 and 5 Democratic co-sponsors, respectively.

But for some experts like Joe Vezzani, CEO, LunarCrush, it doesn’t really matter if Biden is pro or against crypto.

“I’m not worried about the short-term effects that Biden will have on the industry,” he told The Defiant. “The industry will continue to grow and flourish with or without the support of these people, like it always did."