The U.S. Securities and Exchange Commission (SEC) has officially withdrawn the controversial Staff Accounting Bulletin (SAB) 121, marking a significant development in digital asset regulation. The new SAB 122 has been introduced.
The SEC's Decision to Rescind SAB 121
On Thursday, the SEC announced the revocation of SAB 121, which was implemented in 2022. This directive required financial institutions to treat cryptocurrency assets held for platform users as liabilities on their balance sheets. The new guidance under SAB 122 offers a more flexible approach, allowing the custody of digital assets without accounting for them as liabilities. However, entities must disclose the risks and obligations associated with safeguarding crypto assets.
Why Was SAB 121 Controversial?
SAB 121 faced criticism from multiple fronts. The American Bankers Association argued it restricted banks' ability to develop digital asset services. It also faced opposition from both Republican and Democrat lawmakers, who viewed it as a barrier to innovation. Within the SEC, there were opposing views, such as those from Commissioner Hester Peirce, who argued it added unnecessary complexity that hindered crypto sector growth. Congress passed a joint resolution to overrule it, but former President Joe Biden vetoed the decision.
A Shift in Regulatory Strategy
The rescinding of SAB 121 under SEC Acting Chairman Mark Uyeda highlights a more flexible approach to crypto regulation. This marks a contrast with the stricter stance during former Chairman Gary Gensler’s term. The shift aligns with changes in the US political landscape, with President Trump’s administration forming a task force to potentially ease digital asset regulations.
The withdrawal of SAB 121 and introduction of SAB 122 indicate a significant regulatory shift in the USA's approach towards digital assets. Financial institutions can now streamline accounting processes, creating new opportunities for crypto product development. This shift could foster a more competitive and diversified digital asset ecosystem.
