The US Securities and Exchange Commission (SEC) recently announced a major policy shift with the introduction of Staff Accounting Bulletin (SAB) 122, replacing the controversial SAB 121. This move is expected to address previous regulatory challenges that hindered the growth of the crypto custody sector.
SAB 121, which was implemented under former SEC Chair Gary Gensler, required firms offering crypto custody services to classify customer assets as liabilities on their balance sheets. However, this decision was heavily criticized for its complexity and for discouraging banks and financial institutions from entering the crypto custody market. Many viewed SAB 121 as a barrier to the wider adoption of digital asset services.
Efforts to repeal SAB 121 faced obstacles despite bipartisan support. The repeal bill passed in both chambers of Congress, but former President Joe Biden vetoed it, and subsequent attempts to override the veto were unsuccessful.
The introduction of SAB 122 marks a significant shift in policy, rescinding the controversial provisions of SAB 121 and providing a more flexible framework for financial institutions. Firms can now follow established standards from the Financial Accounting Standards Board (FASB) or other international accounting guidelines. The SEC has also emphasized the importance of transparency, urging companies to provide disclosures that help investors understand how crypto assets held on behalf of others are safeguarded.
SEC Commissioner Hester Peirce, a vocal advocate for balanced crypto regulation, has expressed her approval of the new policy. Lawmakers such as House Financial Services Committee Chair French Hill and Senator Cynthia Lummis have also praised the move, highlighting the negative impact of SAB 121 on innovation and banking.
Industry leaders have welcomed the removal of SAB 121, noting that it will likely influence how companies account for and disclose their custodial obligations. Michael Saylor of MicroStrategy pointed out that this policy shift will enable banks to offer Bitcoin custody while complying with more straightforward requirements.
Overall, the introduction of SAB 122 represents a significant step towards creating a more supportive regulatory environment for digital assets. The community’s positive reception of this change indicates a promising future for the crypto custody sector.