- The U.S. SEC has cancelled the SAB 121 rule.
- The revocation of SAB 121 reflects Trump’s push for crypto-friendly regulations.
The U.S. Securities and Exchange Commission (SEC) has withdrawn Staff Accounting Bulletin No. 121 (SAB 121). It is a 2022 directive requiring financial institutions to categorize customer-held digital asset exposures as liabilities on their annual report.
This change has been codified and is expected to improve the regulatory environment of the banks and cryptocurrency companies with responsibilities for the custody of digital assets.
Furthermore, the bulletin asked entities to identify both an asset and its paired liability for digital assets held for clients. It reflects the perceived risk attached to cryptocurrency portfolios.
Because of its strict accounting standards, SAB 121 has become a source of frustration in the financial and crypto communities. Critics complained that the provisions constituted burdensome compliance costs and led to a reluctance among institutions to provide crypto custody services.
Hester Peirce, a Commissioner at the SEC and head of the newly formed crypto task force stated, “Bye, bye SAB 121! It’s not been fun.”
Moreover, the revocation of SAB 121 coincides with the overall project to create a more crypto-friendly regulatory context, under the President of the United States, Donald Trump.
In the days before this decision, President Trump indicated to reduce the regulatory burdens that are imposed on the firms of the cryptocurrency. Also, it promotes the use of digital assets with executive orders.
Specifically, these efforts involve the creation of a crypto advisory council to advise the government on policy. Additionally, the assignment of the SEC to withdraw burdensome accounting rules that govern the holding of cryptocurrencies.
Conversely, the banking industry has welcomed the SEC’s decision. Besides, viewing it as a way to openly re-enter the digital assets world without the pre-existing accounting challenges.
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