SEC Rescinds Rule Blocking Banks from Custodying Bitcoin

The US Securities and Exchange Commission (SEC) has rescinded a rule that prevented banks from custodying cryptocurrencies.

The rule, known as Staff Accounting Bulletin ( SAB 121 ) was introduced by former SEC chair Gary Gensler. It required banks and other financial institutions to list crypto assets as liabilities in their sheets.

As expected, SAB121 was highly controversial. Most believed the complexities involved deterred banks from being involved in crypto custody. It was largely considered the SEC’s attempt to discourage corporate participation in the crypto market. However, the regulator has introduced a new policy, which paves the way for massive adoption.

🚨Chairman @RepFrenchHill : “Finally, the Biden-Harris misguided SAB 121 rule has been rescinded.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

What is SAB 122?

The new policy , SAB 122, provides an accommodating structure and enables banks and other financial institutions to observe international accounting standards or those from the Financial Accounting Standards Board (FASB).

This staff accounting bulletin (“SAB”) rescinds the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users (“Topic 5.FF”),” the regulator explained.

SAB 121 has been rescinded, allowing banks to custody Bitcoin. 🚀 pic.twitter.com/IZrzOfcdXG

— Michael Saylor⚡️ (@saylor) January 23, 2025

The SEC requires banks to provide clients with details on the risks involved with custody assets. The bulletin wrote, “An entity that must safeguard crypto-assets for others should determine whether to recognize a liability related to the risk of loss under such an obligation and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board Accounting Standards Codification.”

Several key voices in crypto, such as Hester Peirce , hailed the new policy as a step in the right direction. Others believe SAB 122 could encourage companies to associate better with crypto.

Bye, bye SAB 121! It’s not been fun: https://t.co/cIwUc0isUE | Staff Accounting Bulletin No. 122

— Hester Peirce (@HesterPeirce) January 23, 2025

Trump’s return to the White House has no doubt been a major win for the industry. The new administration has made several pro-crypto moves, including announcing plans to make the US the crypto capital of the world.

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