The US Securities and Exchange Commission (SEC) has officially withdrawn Staff Accounting Bulletin No. 121 (SAB 121), a crypto accounting rule introduced in 2022, just days after SEC Chair Gary Gensler stepped down. The bulletin, which mandated that companies holding cryptocurrencies on behalf of clients record these assets as liabilities, was replaced with Staff Accounting Bulletin No. 122, signalling a shift in regulatory policy. Hester Peirce @HesterPeirce · Follow Bye, bye SAB 121! It’s not been fun: SEC.gov | Staff Accounting Bulletin No. 122 4:26 am · 24 Jan 2025 10.4K Reply Copy link Read 772 replies Under the updated framework, companies will assess their obligations to safeguard crypto-assets using broader accounting standards, including US GAAP contingency rules and IFRS guidelines. The revisions apply retroactively to fiscal years starting after December 15, 2024, with provisions for early adoption. The withdrawal of SAB 121 comes amid several leadership changes at the SEC. Republican Commissioner Mark Uyeda has assumed the role of acting chair, while a new crypto task force led by Hester Peirce has been established to develop clearer regulatory frameworks. In a statement, the SEC acknowledged the criticisms of its prior enforcement-heavy approach to crypto regulation, describing it as a source of uncertainty. The new task force aims to introduce clarity and practical compliance solutions for the industry. Criticism of the SAB 121 Since its release, SAB 121 faced widespread criticism from the crypto industry, lawmakers, and financial institutions. Opponents argued that the guidance increased compliance costs, deterred banks from offering digital asset custody services, and lacked adequate public consultation. The banking sector voiced concerns that SAB 121 impeded their ability to act as custodians for digital assets, while crypto advocates and lawmakers saw it as a move specifically targeting the digital asset industry. SEC Commissioner Hester Peirce described the rule as overly rigid and an obstacle to innovation. Gary Gensler, the former SEC chair who supported the rule, defended it as a necessary measure to protect investors in bankruptcy scenarios, citing cases where customer cryptocurrency assets were not shielded from creditors. However, efforts to repeal SAB 121 in 2024, including a bipartisan resolution passed by Congress, were vetoed by then-President Joe Biden. Reactions to the repeal of SAB 121 The removal of SAB 121 has been welcomed by the crypto industry and financial institutions as a step toward reducing regulatory burdens and fostering innovation. Paige Pidano Paridon, co-head of the Bank Policy Institute’s regulatory affairs, praised the decision, noting that it would enable banks to securely manage digital assets. Senator Cynthia Lummis, a pro-crypto Republican and chair of the Senate’s digital assets subcommittee, called the rule “disastrous” and celebrated its repeal. Senator Cynthia Lummis @SenLummis · Follow 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. 5:32 am · 24 Jan 2025 7.9K Reply Copy link Read 319 replies Representative Mike Flood, who introduced a resolution to repeal SAB 121 in 2024, characterized the withdrawal as a positive indicator of bipartisan support for a more balanced U.S. crypto policy. Rep. Mike Flood @USRepMikeFlood · Follow Replying to @USRepMikeFlood H.J. Res. 109 received a bipartisan vote in the House of 228-184. flood.house.gov/media/press-re… 5:33 am · 24 Jan 2025 19 Reply Copy link Read 1 reply The SEC’s decision to withdraw SAB 121 reflects a broader shift under a new administration led by pro-crypto President Donald Trump. The post SAB 121 axed: SEC repeals crypto accounting rule as Trump era dawns appeared first on Invezz
