US Banks Can Now Hold Crypto as SEC Annuls SAB 121

The US SEC has finally scrapped the controversial SAB 121 rule that makes it hard for banks in the country to keep custody of crypto.

On Thursday, the US Securities and Exchange Commission (SEC) invalidated the Staff Accounting Bulletin 121 (SAB 121). It was replaced by SAB 122, which permits banks to hold crypto assets. This comes after a crypto task force led by Hester Peirce was established to checkmate activities and compliance with the policy. 

End of SAB 121, SAB 122 In Effect

The SAB 122 was contained in Section FF of Topic 5 in the SAB series. It is titled Accounting for Obligations to Safeguard Crypto-Assets and Entity Holds for its Platform Users. 

Using a measured approach, it revises essential provisions that help in compliance with crypto rules. Financial entities must disclose all risks and obligations involved when safeguarding cryptocurrencies. 

It will help establish a balanced framework for accounting and disclosure activities regarding ownership of cryptocurrencies. Analysts say SAB 122 will reassure investors’ protection and present regulatory financial clarity. Certain reports show that companies can now to engage with crypto without fear of stern regulations. 

This policy has fueled celebration amongst crypto enthusiasts. It signals a paradigm shift in policy, all thanks to Donald Trump’s administration. 

By implication, financial institutions in the US can hold any form of crypto. The SEC recently experienced some leadership overhauling, and Mark Uyeda became the acting chair. He is on track to change most of the strict industry rules former chair Gary Gensler implemented. 

A Historical Review of SAB-121 

In March 2022, SAB 121 was introduced, entailing that companies holding cryptocurrencies for clients must label them as liabilities in their balance sheets. This spiked operational costs and made it difficult for banks to operate because of its massive reporting standards. It also made crypto custody so burdensome for all financial institutions. 

The backlash came rolling in as crypto investors and crypto-friendly lawmakers objected. Defending this action, former SEC chair Gary Gensler labeled it a safeguard for investors against bankruptcy. 

In 2024, certain legislators signed a resolution to annul SAB121. Unfortunately, President Joe Biden immediately vetoed the bill, upholding the SEC’s decision.

By September of the same year, selected Republican lawmakers appealed to Gensler to stop SAB121, but he dropped the plea. Against the run of events, Donald Trump signed his first crypto Executive Order dubbed the Presidential Working Group on Digital Assets Market. 

Their main function is to develop frameworks that address the crypto regulatory landscape. Removing SAB 121 marks one of the first moves after this Executive Order.

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