The US Securities and Exchange Commission (SEC) has rescinded the SAB 121 rule, which previously prevented banks from custodying cryptocurrencies.
Background and Rescission of SAB 121
The SAB 121 rule, introduced by former SEC chair Gary Gensler, required banks to list crypto assets as liabilities. It was controversial and seen as an attempt by the SEC to deter banks from participating in the crypto market. However, this rule has now been rescinded, potentially paving the way for broader adoption of cryptocurrencies.
New Policy SAB 122
The new policy, SAB 122, provides a more accommodating structure, enabling banks and financial institutions to observe international accounting standards or those from the Financial Accounting Standards Board (FASB). Banks are now required to provide clients with information on the risks involved with custodying crypto assets.
Reactions and Implications
Many key voices in the crypto community, such as Hester Peirce, hailed the new policy as a step in the right direction. Some believe SAB 122 could encourage companies to better engage with cryptocurrencies.
The rescission of SAB 121 and the introduction of the SAB 122 policy indicates regulators are increasingly acknowledging the growing role of cryptocurrencies in the financial sector.
