The U.S. Securities and Exchange Commission (SEC) has cancelled SAB 121, a controversial rule impacting crypto companies since 2022.
What SAB 122 Changes
The new guidance in SAB 122 removes the requirements imposed by SAB 121, which forced crypto platforms to account for safeguarding users' assets as liabilities. With SAB 122, companies can now determine any liabilities based on broader accounting standards like FASB ASC Subtopic 450-20 or IAS 37. These standards require companies to assess potential liabilities through loss contingencies and provisions.
SEC's Justification
According to the SEC's official filing, Staff Accounting Bulletins are not formal rules or legally binding interpretations, but guidance reflecting practices followed by the Division of Corporation Finance and the Office of the Chief Accountant. Vanessa A. Countryman, the SEC's Secretary, confirmed that SAB 122 supersedes SAB 121 in the agency's regulatory framework. While the text of SAB 122 does not appear directly in the Code of Federal Regulations, the SEC has updated its table of Staff Accounting Bulletins to reflect the change.
Continued Obligations for Crypto Companies
The rescission of SAB 121 does not relieve crypto companies of the requirement to disclose risks related to safeguarding users' assets. The SEC reminded companies of their existing obligations under broader regulatory requirements, such as Items 101, 105, and 303 of Regulation S-K. These requirements mandate disclosures on business operations, risk factors, and management's discussion and analysis. Companies must also comply with FASB ASC Topic 275, which deals with risks and uncertainties in financial reporting.
The rescission of SAB 121 will greatly reduce the compliance burden on crypto companies, but they are still required to adhere to other regulatory requirements and ensure disclosure of safeguards for user assets.
