FameEX Hot Topics | SEC Withdraws Controversial SAB 121 Crypto Accounting Rule

On January 23, the U.S. Securities and Exchange Commission (SEC) officially rescinded its controversial rule, SAB 121, which had mandated financial firms holding cryptocurrency for customers to classify those assets as liabilities on their balance sheets. The decision was confirmed via a new Staff Accounting Bulletin issued by the SEC, marking the rule's formal cancellation.

Introduced in March 2022, SAB 121 generated significant pushback from the crypto industry, which argued that the rule would create unnecessary complexities in managing digital assets. Under SAB 121, firms were required to treat customer-owned crypto holdings as liabilities, which added an extra layer of administrative burden to financial institutions. Many critics, including financial service professionals and lawmakers, viewed the measure as excessive and disruptive, especially given the nature of crypto assets as client-owned property.

SEC Commissioner Hester Peirce, a vocal supporter of cryptocurrency-friendly policies, celebrated the rescinding of the rule with a post on social media, exclaiming, "Bye, bye SAB 121! It’s not been fun." Peirce had been an outspoken critic of the rule, describing it as an overstep by the SEC. Her post reflected the widespread relief felt by many in the crypto community, who had long opposed the measure.

The decision to rescind SAB 121 also drew praise from lawmakers. House Financial Services Committee Chair French Hill called the rule “misguided,” noting that holding reserves against assets held in custody was not a standard practice in the financial services industry. Representative Wiley Nickel and Senator Cynthia Lummis similarly condemned the rule, with Lummis stating it had stifled innovation in the banking sector and slowed U.S. progress in digital asset development.

This cancellation represents a key shift in the SEC’s regulatory stance on cryptocurrencies under the leadership of acting chair Mark Uyeda. While a bill to repeal SAB 121 initially garnered bipartisan support, it was vetoed by President Joe Biden in 2024. The veto was ultimately upheld when the House failed to override it, signaling ongoing debates over crypto regulation in the U.S.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.