After years of tensions, the repeal of the accounting rule marks a turning point for institutional adoption of cryptocurrencies.
The U.S. Securities and Exchange Commission (SEC) has officially repealed Staff Accounting Bulletin No. 121 (SAB 121), a rule introduced in 2022 that required crypto companies to treat digital assets held for customers as liabilities on their balance sheets. The decision, announced through the new SAB 122, represents a shift in the agency’s regulatory strategy, driven by Commissioner Hester Peirce, who now leads the SEC’s cryptocurrency task force.
What changes with SAB 122
SAB 121, a rule introduced by former SEC Chair Gary Gensler, forced companies that custody cryptocurrencies (such as banks or exchanges) to consider these assets as “debts” on their balance sheets. For example, if a bank managed $1 million in Bitcoin for its customers, it had to hold $1 million in cash reserves. This requirement made it prohibitively expensive and complex for traditional banks to enter the digital asset market.
SAB 122 removes these restrictions, aligning crypto accounting with traditional standards such as FASB ASC 450-20 (US GAAP) and IAS 37 (IFRS), which require liabilities to be recognized only in cases of asset devaluation. Key updates include:
- Balance sheet flexibility: Companies will now estimate liabilities based on potential asset price declines.
- Retroactive effect: The change applies to financial statements starting December 15, 2024, with an option for early adoption.
- Opportunities for banks: Financial institutions, including major U.S. banks, can now offer crypto custody services without capital penalties.
In 2024, a bipartisan vote in Congress had called for the repeal of SAB 121, but President Biden vetoed the measure, describing the rule as “a protection for investors.” The shift came with the Trump administration, which pushed for pro-innovation policies, including an executive order against CBDCs.
SEC Commissioner Hester Peirce, a known crypto advocate, commented:
