Key Points:
- The U.S. SEC has revoked its controversial crypto accounting guidance, SAB 121, which required financial institutions to list crypto assets as liabilities on their balance sheets.
- The SEC’s new bulletin, SAB 122, clarifies that firms must disclose risks related to safeguarding crypto assets but no longer need to treat them as liabilities.
The U.S. Securities and Exchange Commission has withdrawn its controversial crypto accounting guidance, SAB 121, following fierce pushback from lawmakers and the crypto industry.
Read more: BNY Mellon Bitcoin ETF Custody Service Now Exempted From SAB 121
SEC Rescinds Controversial Crypto Accounting Guidance
The SEC said in a public statement Thursday that it rescinded SAB 121 by issuing a new bulletin, SAB 122, which closes the debate over the issue.
SAB 121, released in March 2022, would require financial institutions holding customers’ crypto assets to count those assets as liabilities on their balance sheets.
The crypto accounting guidance has come under fierce attacks from the crypto industry, as its critics claimed that it would over-complicate the management of crypto assets and ultimately discourage banks from offering custody services of digital assets. Even the lawmakers had one-sided concerns about increased compliance costs that might result from this rule.
This means the new SEC guidance rescinds the interpretive guidance under SAB 121, which many found to be burdensome. The commission, however, clarified that financial entities should disclose risks and obligations related to the custody of crypto assets, but they no longer need to identify and present such assets as liabilities.
Entities shall look to the accounting guidance issued by the Financial Accounting Standards Board (FASB) or International Accounting Standards (IAS) for financial reporting.
About Shift in Crypto Asset Regulations by SEC Leadership Shakeup
The updated crypto accounting guidance is effective retrospectively for fiscal years beginning after December 15, 2024, and provides the option for early adoption. This move marks the latest shake-up at the SEC, which has seen the appointment of Mark Uyeda, a Republican Commissioner, as acting chair since Gary Gensler’s departure from the commission.
Uyeda, along with fellow Commissioner Hester Peirce, who now oversees a new crypto task force, had been vocal about the opposition against the complexity of the prior rule.
The killing of SAB 121 also comes on the heels of a failed bipartisan effort in Congress to repeal the guidance, which was vetoed by former President Joe Biden in June of 2024.
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