Key Takeaways:
- The SEC has rescinded Staff Accounting Bulletin (SAB) 121, which required financial firms to report customers’ crypto assets on their own balance sheets.
- New guidance under SAB 122 reverts to established accounting principles, such as FASB and IAS, while emphasizing transparency about safeguarding crypto assets.
- The bulletin’s withdrawal follows industry criticism and opposition from SEC Commissioner Hester Peirce, who argued the guidance was overly broad and inappropriate.
The U.S. Securities and Exchange Commission (SEC) has withdrawn Staff Accounting Bulletin (SAB) 121, a contentious directive that required financial firms to include customers’ crypto assets on their own balance sheets.
The SEC introduced new guidance, SAB 122, which formally rescinds SAB 121 and instructs firms to follow established accounting standards, such as those by the Financial Accounting Standards Board (FASB) or the International Accounting Standards (IAS).
🚨BREAKING: The @SECGov has officially RESCINDED SAB 121. https://t.co/I8up9RaFBb pic.twitter.com/UXY2M41JRl
— Eleanor Terrett (@EleanorTerrett) January 23, 2025
SAB 121, introduced under former SEC Chair Gary Gensler, aimed to protect investors during bankruptcies, as courts often ruled that crypto assets were not exempt from claims.
However, the bulletin faced widespread criticism from the crypto industry and lawmakers, culminating in a Congressional Review Act resolution that passed both houses of Congress but was ultimately vetoed by President Joe Biden.
SEC Commissioner Hester Peirce, a consistent critic of SAB 121, announced its withdrawal.
Bye, bye SAB 121! It's not been fun: https://t.co/cIwUc0isUE | Staff Accounting Bulletin No. 122
— Hester Peirce (@HesterPeirce) January 23, 2025
She had opposed the bulletin for its lack of clarity on how securities laws applied to crypto and questioned whether an accounting directive was the right tool for such matters.
The SEC emphasized that firms must still disclose their obligations to safeguard crypto assets held for others, aligning with broader investor transparency principles.