KEY POINTS
- SAB 121 required banks and other traditional financial institutions to hold customers' crypto assets as liabilities on their balance sheets
- Banks can now hold their customers' Bitcoin and other crypto assets without the added financial burden of having capital reserves
- The SEC's move has been called a 'high-integrity' move as it did not wait for other major corrections
The U.S. Securities and Exchange Commission (SEC) under Acting Chair Mark Uyeda has officially rescinded Staff Accounting Bulletin 121 (SAB 121), a divisive bulletin that prevented banks from providing Bitcoin custody for their customers, less than a week after former Chair Gary Gensler stepped down.
For years, the cryptocurrency community had been raising concerns about the said bulletin, with many saying it is not conducive to digital asset innovation and growth.
SAB 121 Finally Dumped
In a new staff accounting bulletin published Thursday, the SEC rescinded "the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for Its Platform Users ('Topic 5.FF')."
The SEC did note that staff should still remind service providers to "continue to consider existing requirements to provide disclosures that allow investors to understand an entity's obligation to safeguard crypto-assets held for others."
Basically, SAB 121 required banks to hold customers' crypto assets as liabilities on balance sheets. This meant that banks had to hold corresponding capital reserves for the digital assets in custody, which is an additional financial burden to banks.
With SAB 121 gone, it is expected that more banks and financial institutions will now be more interested in Bitcoin and crypto custody. In turn, it could drive broader adoption for digital assets.
The SEC, under a new leadership, has been moving fast in implementing a shift within the regulatory agency following Gensler's unceremonious exit on the same day U.S. President Donald Trump was inaugurated.
Crypto Celebrates Milestone
For the crypto community, which has long been criticizing the bulletin and has been calling for better regulations and policies in approaching blockchain and crypto, the development is a huge win.
Prominent financial services lawyer James Murphy, who goes by MetaLawMan on X, called it a "high-integrity move," given how the SEC immediately moved to rescind the bulletin without the need for "other major course corrections."
Thank you!
— MetaLawMan (@MetaLawMan) January 23, 2025
This is awesome.
High-integrity move.
No need to wait to make other major course corrections.
One user noted how long it took for the crypto community to finally feel some relief. "Feels gratifying to know our patience in this digital asset space is finally paying off," the user wrote.
MARA Holdings Chairman and CEO Fred Thiel said he now expects to see "big banks" entering the space now that SAB 121 has been repealed.
SEC Commissioner Hester Peirce, who was designated earlier this week to lead the SEC's Task Force for crypto, has also bid her farewell to the bulletin. "Bye, bye SAB 121! It's not been fun," she wrote.
Bye, bye SAB 121! It's not been fun: https://t.co/cIwUc0isUE | Staff Accounting Bulletin No. 122
— Hester Peirce (@HesterPeirce) January 23, 2025
Sen. Cynthia Lummis, R-Wyo., blasted the contentious bulletin as "disastrous for the banking industry, and only stunted American innovation and advancement of digital assets." Lummis is a known Trump ally and has been pushing for a national strategic Bitcoin reserve.
