President Joe Biden's recent veto of H.J.Res.109, aimed at repealing the SEC's Staff Accounting Bulletin No. 121 (SAB 121), has left the crypto community searching for legislative alternatives. With broad bipartisan support behind the repeal, can Congress override the veto?

H.J.Res.109 garnered significant bipartisan backing in Congress, passing with 60 votes to 38 in the Senate. The resolution seeks to remove SAB 121, which mandates banks to record customer crypto assets on their balance sheets as liabilities, a unique requirement for digital assets. Its repeal would streamline banking interactions with the crypto industry.

Despite strong congressional support, President Biden vetoed the repeal, citing concerns about consumer and investor protection. This move has sparked discussions within Congress about the feasibility of overriding the veto, which requires a two-thirds majority in both chambers.

The House needs 290 votes, where there are currently 218 Republicans and 213 Democrats. In the Senate, 66 votes are needed, with 49 Republicans, 47 Democrats, and four independent senators. While the Republican Party generally favors crypto-friendly policies, securing sufficient Democratic support remains pivotal.

Republican Senator Cynthia Lummis emphasized that bipartisan support for repealing SAB 121 reflects procedural concerns rather than a strict endorsement of crypto assets. She noted that digital assets have gained bipartisan traction, as seen with the recent passage of the Financial Innovation and Technology for the 21st Century (FIT21) Act.

However, the road to overriding Biden's veto is fraught with political risks, especially during an election year. Many Democrats may hesitate to challenge the party leader directly on such a divisive issue.

A strategic alternative lies in the Lummis-Gillibrand Payment Stablecoin Act, introduced in April 2024. This legislation provides a regulatory framework for stablecoins and explicitly counters SAB 121 by excluding crypto assets held by financial institutions from balance sheet categorization as assets or liabilities.

Daniel McCabe, former crypto lawyer and chief compliance officer of Flexa, highlighted the legislative wisdom of passing the Stablecoin Act rather than risking a direct confrontation with Biden's veto during an election cycle. This approach could garner sufficient bipartisan support without escalating political tensions.

Moreover, lobbying efforts from the crypto industry and banking sectors are intensifying. Coinbase recently donated $25 million to Fairshake, a PAC supporting crypto-friendly candidates, indicating heightened industry involvement in legislative advocacy.

McCabe stressed that both the banking lobby and pro-crypto groups have substantial sway in Congress. Their influence could facilitate the passage of the Stablecoin Act or compel the SEC to reconsider SAB 121, thereby avoiding direct conflict with the Biden administration ahead of the elections.

In navigating these complexities, Democrats face a delicate balance between embracing innovative financial technologies and addressing internal ideological divisions. The outcome will hinge on their ability to navigate bipartisan support while mitigating political risks in the lead-up to the elections.