The U.S. Securities and Exchange Commission (SEC) has taken a step toward change by officially retracting the SAB 121 directive related to cryptocurrency accounting. This decision coincides with the exit of former chairman Gary Gensler, marking significant alterations in the regulatory environment for digital assets.
Reasons for the Withdrawal of SAB 121
The SEC’s decision to rescind SAB 121, initially released in 2022, is aligned with the publication of Staff Accounting Bulletin No. 122. SAB 121 required firms holding cryptocurrencies for clients to classify these digital currencies as liabilities on their balance sheets.
Stakeholders' Response
The retraction of SAB 121 has sparked positive reactions across the cryptocurrency community and banking sectors. Critics of the original guidance claimed it inflated compliance costs and obstructed banks from offering digital asset custody services. The SEC emphasized that organizations should refer to existing standards from the Financial Accounting Standards Board (FASB) or the International Accounting Standards (IAS) instead.
A New Era in Cryptocurrency Regulation
The SEC’s latest action marks the beginning of a revised era in cryptocurrency regulation, as it seeks to establish a more adaptable framework that could enhance the growth potential of the crypto sector. New leadership under Republican Commissioner Mark Uyeda aims to promote clarity in crypto regulations.
The retraction of SAB 121 paves the way for a more flexible and innovative approach in cryptocurrency regulation. This could catalyze further growth in the digital assets sector and alleviate regulatory hurdles for banks.