- The US Securities and Exchange Commission has annulled SAB (Staff Accounting Bulletin) 121, the guideline that formerly prevented financial institutions from custodying crypto.
- A new SAB 122 effectively annuls the untenable provisions of the earlier guideline.
The US Securities and Exchange Commission has rescinded the infamous SAB (Staff Accounting Bulletin) 121, an agency guideline that prevented financial institutions from providing crypto custody services. SEC Commissioner Hester Pierce announced the big development on Thursday night via a social media post.
SAB 121 Annulled 3 Days After Gensler’s Resignation
Three days after former SEC Chair Gary Gensler’s resignation and into the Trump government, the Commission has successfully annulled the SAB 121 guideline despite the popular expectation that President Trump will issue an executive order to undo the guideline. The Commission has now introduced SAB 122 to replace the former guideline.
“This SAB rescinds the interpretive guidance included in Topic 5.FF in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users,” said the SEC.
Published and adopted in 2022 under ex-Chair Gensler, SAB 121, which was supposed to just provide the agency staff’s views on accounting obligations of financial institutions for crypto assets held for customers, overstepped its boundaries. It ultimately became a rule, placing an accounting burden on intending crypto asset custodians as it required extreme reporting criteria for digital assets held for customers.
However, the new amendment, SAB 122, now streamlines risk disclosure and accounting requirements for crypto custody entities. They can now determine whether to record a liability for themselves based on the risk of loss of a crypto asset based on some prescribed US and international accounting standards, including the “Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Subtopic 450-20.”
The Commission also reminds entities to follow existing requirements in providing disclosures that enable investors to know the scope of an entity’s obligation to protect the crypto assets held for customers.
Lawmakers, Crypto Top Guns Celebrate SAB 121 Repeal
Thursday’s repeal has sent shockwaves throughout the industry, in what’s expected to be the single biggest catalyst for Bitcoin and crypto appreciation. While it does not come as a complete surprise, industry leaders tilted more towards a Trump executive order to end the guideline.
“Today is a new day for digital assets. Rescinding SAB 121 opens up a new era for cryptocurrency and our digital financial future,” said Rep. Mike Flood, who sponsored House Resolution to repeal SAB 121.
“This is just the beginning. I look forward to working with President Trump and my colleagues in Congress as we pave the way for digital innovation and work to get a digital assets framework in place in the coming months.”
Similarly, Republican Majority House Whip Tom Emmer bid goodbye to the “stupidest SEC guidance (rule)” ever. Meanwhile, crypto industry big names, including Ripple’s Stuart Alderoty and James Murphy ( a.k.a MetaLawMan), applaud Acting Chair Mark Uyeda and Commissioner Pierce for seeing the repeal through.
After Gensler’s and Commissioner Jamie Lizárraga’s departure from the agency, the agency is left with a quorum of Pierce, Uyeda, and Crenshaw, giving the Republicans a 2-1 majority vote to repeal the guideline. More pro-crypto policy actions are expected from the acting SEC regime while it awaits the Senate confirmation of Pauk Atkins as its Chair.
