TLDR
- SEC rescinds SAB 121 crypto accounting rule following Gary Gensler’s departure, replacing it with more flexible SAB 122 guidance
- Banks can now use standard accounting principles for crypto custody instead of recording all assets as liabilities
- Change comes after bipartisan attempts to repeal SAB 121 through Congress were vetoed by Biden
- New crypto task force led by Hester Peirce and Mark Uyeda aims to create clearer regulatory framework
- Banking industry welcomes change as removal of major barrier to offering crypto custody services
The Securities and Exchange Commission (SEC) has withdrawn its controversial crypto accounting guidance known as Staff Accounting Bulletin 121 (SAB 121), marking a major shift in how banks and financial institutions can handle digital asset custody services.
The change comes just days after Gary Gensler’s exit as SEC Chair and represents a clear break from previous policy. The SEC announced the decision on its website, introducing Staff Accounting Bulletin 122 (SAB 122) as the replacement guidance.
Under the old rule SAB 121, which was implemented in 2022, companies holding cryptocurrencies for their customers had to record these assets as liabilities on their balance sheets. This requirement created extra costs and complications for banks wanting to offer crypto custody services.
The new guidance allows banks to return to using standard accounting principles when dealing with digital assets. Companies can now follow either Financial Accounting Standards Board (FASB) rules or International Accounting Standards (IAS) when accounting for crypto assets they hold for clients.
Hester Peirce, an SEC commissioner who now leads the agency’s crypto unit, celebrated the change on social media platform X, writing “Bye, bye SAB 121! It’s not been fun.” Peirce had previously criticized the rule as too rigid and harmful to innovation.
Bye, bye SAB 121! It’s not been fun: https://t.co/cIwUc0isUE | Staff Accounting Bulletin No. 122
— Hester Peirce (@HesterPeirce) January 23, 2025
The banking industry has responded positively to the change. Paige Pidano Paridon from the Bank Policy Institute said the decision would help banks return to their natural role as secure custodians of digital assets.
Mark Uyeda, who took over as acting SEC chair this week, has already shown a different approach to crypto regulation. On Tuesday, he announced a new crypto task force led by Hester Peirce to develop clearer rules for the industry.
The path to this change included attempts by Congress to remove SAB 121 through official channels. Both the House and Senate passed a bipartisan resolution to repeal the rule in 2024, but then-President Biden vetoed the measure.
The crypto industry had long complained about SAB 121, saying it was unfairly targeted at digital asset companies and implemented without proper public input. Banks argued that the rule made it nearly impossible for them to provide crypto custody services.
Gensler had defended SAB 121 during his time as chairman, pointing to bankruptcy court cases where customer cryptocurrency wasn’t protected from creditors. He said the strict accounting rules were needed to protect investors.
Political support for the change has come from both parties. Senator Cynthia Lummis, who chairs the digital assets subcommittee, called the original rule “disastrous” and praised its removal. Representative Mike Flood, who led efforts to repeal SAB 121 in Congress, said the change shows growing bipartisan support for updated crypto policies.
The SEC’s statement acknowledged problems with their previous approach, noting they had “primarily relied on enforcement actions to regulate crypto, which has created uncertainty.” The agency said clear guidance and practical solutions had been lacking for companies trying to follow the rules.
Under SAB 122, banks can now treat potential losses from crypto custody as contingent liabilities, making it easier to comply with regulations. This change is expected to help banks expand their services in the crypto sector.
The timing of this change aligns with broader shifts in U.S. crypto policy under new leadership, including stated goals to make the country more welcoming to crypto innovation while maintaining appropriate oversight.
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