SEC Withdraws SAB 121: Banks No Longer Hold Cryptocurrencies

The United States Securities and Exchange Commission (SEC) has just published Staff Accounting Bulletin (SAB) No. 122, rescinding previous guidance under SAB 121, which discouraged banks from holding Bitcoin under their custody. .

This means that traditional banks and financial institutions can now offer cryptocurrency services without significant regulatory barriers.

Bank of America Can Monitor Bitcoin

SAB 121 requires companies that hold crypto assets for their customers (like exchanges) to recognize both assets and liabilities for those holdings on the balance sheet.

Companies may now assess their obligation to protect these assets differently, specifically through potential liabilities, such as potential losses due to theft or fraud.

“Goodbye SAB 121! Not an enjoyable journey | Staff Accounting Notice No. 122,” SEC commissioner Hester Peirce write on X (formerly Twitter).

Simply put, SAB 122 removes the rigid requirement that banks record customer crypto assets such as Bitcoin as liabilities on the balance sheet.

This change simplifies compliance, reducing the financial burden and capital requirements that were previously associated with cryptocurrency custody under SAB 121.

“Not even an executive order needed! Thank you Hester Peirce and President Uyeda! This is the right decision IMO,” said ETF analyst James Seyffart write.

Overall, the new guidance allows more banks to safely and effectively provide Bitcoin custodial services as they only need to account for potential losses such as potential liabilities.

Banks can now hold and protect cryptocurrency for customers however they see fit. Companies are free to decide whether they need to recognize a liability for hedge risks and how to measure it.

Cryptocurrency Regulation in the United States is Changing

The crypto community is excited about this news. For years, US banks have wanted to monitor Bitcoin but have been unable to. MicroStrategy’s Michael Saylor also did share your excitement on social networks. In May 2024, both the House and Senate passed a resolution to repeal SAB 121. However, President Joe Biden rejected the resolution.

The decision comes after the SEC established a cryptocurrency task force led by Hester Peirce yesterday. The government released a series of pro-cryptocurrency statements today. Previously, President Trump signed his first executive order related to cryptocurrency, suggesting that the United States should establish a digital asset reserve.

Overall, it seems like the crypto regulatory space in the United States is finally changing, and crypto companies are likely to see major growth in the country.