The SEC has officially withdrawn SAB 121 following mixed reactions. The new SAB 122 bulletin offers a more flexible regulatory approach.
The SEC's Decision to Rescind SAB 121
Last week, the SEC announced the revocation of SAB 121, initially introduced in 2022. It required financial institutions to list cryptocurrencies as liabilities, which caused dissatisfaction across the financial and crypto industries. SAB 122 now allows for custody of digital assets without marking them as liabilities but mandates disclosure of risks and obligations.
Why Was SAB 121 Controversial?
SAB 121 faced criticism from multiple fronts. The American Bankers Association claimed it restricted banks' ability to develop and scale digital asset services. Bipartisan opposition viewed it as a barrier to innovation. SEC Commissioner Hester Peirce emphasized that it added unnecessary complexity and confusion, hampering the growth of the crypto sector.
A Shift in Regulatory Strategy
The rescinding of SAB 121 comes under SEC Acting Chairman Mark Uyeda. The approach signifies a more flexible strategy to crypto regulation. Many in the crypto community welcome this change, seeing it as a supportive sign from the SEC. The shift aligns with broader U.S. political changes favoring crypto innovations.
The rescinding of SAB 121 and the introduction of new guidance under SAB 122 pave the way for increased bank participation in the crypto industry. This regulatory shift supports the creation of a more diverse and competitive digital asset ecosystem.
