Hope for the expansion of crypto banking services in the United States has been dashed as a new White House statement crushes efforts to free American banks to offer crypto custody services. Despite passing through the House of Representatives, a Republican-led effort to overturn prior accounting guidance has been met with a firm stance from the Democrat-led White House.

The House of Representatives was poised to vote on House Resolution 109 (H.J. Res. 109), which aimed to strike down accounting guidance from regulators regarding banks' ability to provide crypto custody services. However, just hours before the vote, the Biden Administration announced its intention to veto the resolution if it made its way through Congress.

In a statement, the White House highlighted the importance of the guidance, known as Staff Accounting Bulletin (SAB) 121, in protecting investors in crypto-asset markets and safeguarding the broader financial system. The President's office emphasized that any attempt to overturn this guidance would disrupt the SEC's work and pose risks to financial stability.

Despite garnering support from all Republican representatives and some Democrats, Wednesday's resolution passed through the House with only 55% of the vote, falling short of the two-thirds majority needed to override a presidential veto.

The sponsor of the resolution, Mike Flood (R-Nebraska), criticized the SEC for not consulting appropriate Federal banking agencies before issuing SAB 121. Critics argue that the guidance imposes prohibitive requirements on banks, making it financially unfeasible for them to offer crypto custody services.

Financial Services Committee chair Patrick McHenry echoed these sentiments, stating that SAB 121 forces financial institutions to hold customers' digital assets on their balance sheets, resulting in high costs. McHenry emphasized that overturning this guidance would enable consumers to hold their digital assets securely through regulated banks and financial institutions.

With the White House's firm stance and the failure to secure sufficient support in Congress, the future of crypto banking services in the US remains uncertain. Advocates of crypto innovation are left disappointed as regulatory hurdles persist in the nation's financial landscape.