- SEC’s rollback of SAB 121 clears hurdles for U.S. banks to offer crypto custody.
- SAB 121 rollback celebrated, but broader regulatory alignment remains crucial.
- Traditional accountants criticized SEC’s SAB 121 for violating established GAAP standards.
The rollback of the SEC’s Staff Accounting Bulletin (SAB) 121 is a big win for both the U.S. crypto and banking industries. This decision removes a major obstacle that complicated U.S. banks’ ability to offer digital asset custody services.
This change has been praised by many, especially in the crypto sector, who saw the original guidance as an unnecessary hurdle. But while this rollback is a definite victory, experts caution that further action is needed to ensure full industry integration.
Why SAB 121 Was So Controversial
SAB 121, put in place by the SEC under Chairman Gary Gensler, was seen by many as a way to restrict U.S. banks from dealing with crypto assets. The regulation required banks to treat crypto assets as liabilities when providing custody services, creating a whole new way of accounting for them.
Many in the crypto world saw this as a deliberate attempt by the SEC to prevent banks from fully embracing the crypto business. For crypto industry players, this regulation seemed like an effort to slow down growth within the sector.
Even traditional accountants were confused by the new guidelines. Jim Kroeker, former vice chair of the Financial Accounting Standards Board (FASB), noted that the guidance created a new accounting model that went beyond the SEC’s authority.
Related: US Lawmakers Urge SEC To Repeal the Disastrous SAB 121 Bill
This was seen as a violation of standard accounting practices. Kroeker pointed out that SAB 121 lacked proper due process, and its implementation strayed from the Generally Accepted Accounting Principles (GAAP) established by FASB.
Positive Reactions, What’s Next for Banks and Crypto
The rollback of SAB 121 has been greeted with enthusiasm from both crypto advocates and bankers. Industry experts say the decision lightens the burden on banks, paving the way for them to offer crypto custody services more easily.
Related: SEC Loosens SAB 121 Rules, Paving the Way for Banks to Enter Crypto Custody Market
Still, this is just a first step. Banks and financial institutions are still waiting for other regulatory bodies, such as the Federal Reserve and the Office of the Comptroller of the Currency (OCC), to get on board with this new stance. Once that happens, the full potential of crypto payments and custody services can finally be realized within the traditional banking sector.
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