SEC Crypto Accounting Guidelines Relaxed for Some Companies

Key Points:

• The SEC has granted exemptions from strict cryptocurrency accounting rules (SAB 121) to certain companies and financial institutions following industry requests.
• Despite no changes to SEC crypto accounting guidelines, companies demonstrated new technologies allowing cryptocurrency retrieval in bankruptcies.

Several companies and financial institutions have sought relief from controversial crypto accounting guidelines issued under SEC Staff Accounting Bulletin (SAB) 121, according to Bloomberg Tax.

Read more: House Wants to Overturn Biden’s SAB 121 Veto of Crypto Custody Standards

SEC Crypto Accounting Rules Exempted for Certain Companies

The SEC staff has agreed to certain business requests, allowing these entities flexibility in their accounting practices related to cryptocurrencies.

SAB 121, introduced in March 2022, has been a focal point for companies amid concerns following several high-profile bankruptcies in the cryptocurrency industry. Companies have approached the SEC seeking clarity and flexibility in developing policies and procedures specific to handling cryptocurrencies.

Despite no revisions to SAB 121 itself, companies have demonstrated new technologies and procedures that ensure cryptocurrency can be retrieved by customers in bankruptcy scenarios, akin to traditional assets like US dollars. The demonstration has led the SEC to exempt some entities from strict compliance with SAB 121.

The SEC crypto accounting guidelines could potentially broaden the range of companies available for American crypto holders to store their assets. However, banking industry representatives argue that adherence to SAB 121 imposes stringent capital requirements, limiting their ability to offer cryptocurrency services.

Congress Fails to Overturn SEC Guidance on Cryptocurrency

Efforts to overturn SAB 121 have faced political challenges. The US House of Representatives recently failed to override President Biden’s veto of a resolution aimed at rescinding the SEC crypto accounting guidance. Despite majority support in the House, the vote fell short of the required two-thirds majority.

The debate underscores ongoing tensions between regulatory oversight and industry innovation in the burgeoning cryptocurrency sector. Companies like Coinbase and Robinhood have already begun reporting their customers’ crypto holdings on their balance sheets since 2022, adapting to evolving regulatory landscapes.