The U.S. Securities and Exchange Commission has officially rescinded SAB 121, a controversial accounting guideline that had long been viewed as a major obstacle for banks seeking to enter the crypto market. The repeal is being seen as a significant policy shift that could make it easier for traditional financial institutions to offer digital asset services, particularly custody.
In its latest Staff Accounting Bulletin 122, the SEC said it is withdrawing the interpretive guidance previously included in Topic 5, Section FF of the Staff Accounting Bulletin Series. That guidance addressed the accounting treatment for obligations tied to safeguarding crypto-assets held by an entity on behalf of platform users. The original bulletin had been introduced in March 2022.
Why SAB 121 Faced Strong Opposition
The rule drew criticism because it effectively required banks and similar institutions to reflect customer crypto holdings on their own balance sheets when providing custody-related services. That treatment raised compliance and capital costs, making crypto custody significantly less attractive for regulated financial institutions. Critics argued that the policy discouraged banks from participating in the digital asset sector and slowed crypto adoption within the U.S. financial system.
SAB 121 also became the focus of a broader political battle between Congress and the executive branch. Earlier, lawmakers had passed a resolution under the Congressional Review Act with bipartisan backing in an effort to overturn the bulletin. However, former President Joe Biden vetoed the measure, saying such action would improperly limit the SEC’s ability to establish appropriate guardrails and respond to future issues.
A New Direction for Traditional Finance
Under acting SEC chair Mark T. Uyeda, the agency has now reversed course. SEC Commissioner Hester Peirce, a long-time critic of SAB 121, welcomed the decision publicly, while Senator Cynthia Lummis said the rule had been “disastrous” for banks and harmful to innovation in the U.S. digital asset industry.
With SAB 121 removed, banks and other traditional financial firms are now freer to provide crypto-related services to clients, including custody. Market participants see the decision as opening the door to broader mainstream access to digital assets through established financial institutions. Even so, wider adoption will still depend on how firms navigate compliance, risk management, and customer demand in the next phase of market development.