The reversal, announced on Jan. 23 via a new Staff Accounting Bulletin (SAB), nullifies the prior guidance introduced under SAB 121 in March 2022. This move comes as a win for the crypto industry, which had long criticized the rule as a barrier to innovation and financial practicality.
SAB 121 had mandated that financial institutions acting as custodians for cryptocurrencies report those holdings as liabilities on their balance sheets. Critics argued this diverged from standard financial practices, adding unnecessary complexity for banks and other institutions looking to engage in crypto custody.
House Financial Services Committee Chair French Hill welcomed the decision, calling SAB 121 a “misguided” policy.
“Holding reserves against the assets held in custody is NOT standard financial services practice and am pleased this rule was nullified,” Hill tweeted.
🚨Chairman @RepFrenchHill: “Finally, the Biden-Harris misguided SAB 121 rule has been rescinded. Holding reserves against the assets held in custody is NOT standard financial services practice and am pleased this rule was nullified. I applaud @SECGov for taking strong steps… pic.twitter.com/PFz4PKeT2t
— Financial Services GOP (@FinancialCmte) January 23, 2025
Others, including Representative Wiley Nickel, warned that SAB 121’s requirements could have concentrated crypto custody with non-bank entities, potentially increasing systemic risk. Senator Cynthia Lummis, a long-time crypto advocate, went further, describing the rule as “disastrous” for the banking sector and a roadblock to American innovation in digital assets.
“I am THRILLED to see it repealed and get the SEC back on track to fulfilling its intended mission,” Lummis stated.
SAB 121 was disastrous for the banking industry, and only stunted American innovation and advancement of digital assets. I am THRILLED to see it repealed and get the SEC back on track to fulfilling its intended mission. https://t.co/KkWQmNDJ8I
— Senator Cynthia Lummis (@SenLummis) January 24, 2025
The repeal marks the SEC’s first major policy change under the Trump administration, with acting chair Mark Uyeda leading the effort. A legislative attempt to repeal SAB 121 had previously gained bipartisan support in Congress but was vetoed by former President Joe Biden in June 2024. The House failed to override the veto, falling short by 60 votes.
This reversal may signal a broader shift in regulatory attitudes toward digital assets under the current administration, with industry players likely to view it as a step toward reducing red tape and fostering innovation.
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