Damaging SEC Staff Bulletin that Undermined Digital Assets, SAB 121, Revoked

SEC Staff Accounting Bulletin (SAB) 121 is no more.

Today, SAB 122 rescinded the guidance of SAB 121 – the bulletin that “expressed the views of the staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users.” Effectively, this made it challenging for certain regulated entities to custody digital assets. The now erased SAB 121 stated:

“The interpretations in this SAB express views of the staff regarding the accounting for entities that have obligations to safeguard crypto-assets held for their platform users. In recent years, the staff has observed an increase in the number of entities that provide platform users with the ability to transact in crypto-assets. In connection with these services, these entities and/or their agents may safeguard the platform user’s crypto-asset(s) and also maintain the cryptographic key information necessary to access the crypto-asset. The obligations associated with these arrangements involve unique risks and uncertainties not present in arrangements to safeguard assets that are not crypto-assets, including technological, legal, and regulatory risks and uncertainties.”

And;

“These risks can have a significant impact on the entity’s operations and financial condition. The staff believes that the recognition, measurement, and disclosure guidance in this SAB will enhance the information received by investors and other users of financial statements about these risks, thereby assisting them in making investment and other capital allocation decisions.”

The regulatory requirements and perceived risks compelled firms not to provide crypto services. You may read SAB 121 here.

SAB 122 “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.”

SAB 122 is effective on the date it appears in the Federal Register.

Earlier this week, Anand Sithian, a partner at the law firm of Crowell & Moring, told CI that the quickest way the SEC could improve the crypto ecosystem was to repeal SAB 121.

Commissioner Hester Peirce celebrated the change on X, stating its NOT been fund:

 

 

SAB 121 was part of a broader effort by the SEC under the guidance of former Chair Gary Gensler to undermine digital asset innovation. With the change in government, efforts to crush crypto development and bespoke regulation are no more.



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