The U.S. Securities and Exchange Commission has rescinded a highly controversial rule that set certain rules for banks and other public firms wanting to hold crypto.
The reversal marks another shakeup in the SEC following the exit of ex-chair Gary Gensler and potentially a new approach to regulating crypto assets under Commissioner Hester Pierce, who now leads the Commission’s newly created crypto task force.
SEC Withdraws SAB 121
The SEC published a new Staff Accounting Bulletin on Jan. 23, withdrawing its controversial SAB 121.
Introduced in March 2022, SAB 121 required financial firms holding crypto on behalf of customers to report the assets as liabilities on their balance sheets. Crypto proponents pushed against the bulletin, saying it effectively barred banks from entering the market.
SAB 122 issued on Thursday “rescinds the interpretive guidance the interpretive guidance included in Topic 5.FF in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets on Entity Holds for its Platform Users.”
Under the revised framework, companies will now assess obligations to safeguard crypto-assets using broader accounting standards, such as U.S. GAAP contingency rules and IFRS guidelines.
“Bye, bye SAB 121!” said SEC Commissioner Hester Pierce in a post on X. “It’s not been fun.”
Pierce has long opposed the guidance, suggesting that after its adoption in 2022, it did not account for the SEC not issuing any guidance about how securities laws apply to the nascent cryptocurrencies and that an accounting bulletin might not be the right tool for the type of guidance contained in SAB 121.
In 2024, a bipartisan coalition of U.S. legislators passed a resolution in both houses that would’ve rescinded SAB 121, but former President Joe Biden vetoed the bill, upholding the regulator’s decision.
New Era Of Crypto Regulation
Senator Cynthia Lummis noted that SAB 121 “was disastrous for the banking industry and only stunted American innovation and advancement of digital assets.”
”I am THRILLED to see it repealed and get the SEC back on track to fulfilling its intended mission,” she added.
The cancellation of SAB 121 marks the first huge move by the SEC under the new President Trump administration and interim chairman Mark Uyeda. Former Chair Gensler took a different approach to regulating crypto and called on companies to register with the SEC, unleashing lawsuits against those that failed to comply.
But it’s a new era under Trump, who was inaugurated on Jan. 20 after running a pro-crypto campaign. On Thursday, the president signed his first crypto-related executive order, establishing a Presidential Working Group for championing crypto regulation and exploring the creation of a potential national stockpile for crypto. It also forbids the establishment of a central bank digital currency (CBDC), aka a “digital dollar.”
