SEC Revokes SAB 121: US Banks Now Allowed to Custody Bitcoin

SEC Revokes SAB 121: US Banks Now Allowed to Custody Bitcoin

The Securities and Exchange Commission (SEC) has announced Staff Accounting Bulletin (SAB) No. 122, effectively canceling SAB 121. This significant regulatory change removes previous guidance that discouraged banks from holding Bitcoin in custody.

US Banks Can Now Custody Bitcoin

SAB 121 previously required firms holding crypto-assets on behalf of customers to record both an asset and a liability on their balance sheets. This new ruling alters that requirement. Companies can now assess their obligations differently, focusing on contingent liabilities like potential losses from theft or fraud.

SEC Commissioner Hester Peirce celebrated the change on X (formerly Twitter), stating, "Bye, bye SAB 121! It’s not been fun | Staff Accounting Bulletin No. 122."

In essence, SAB 122 simplifies compliance for banks by eliminating the rigid requirement to record customer-held crypto assets as liabilities. This reduces the financial burden and capital requirements previously associated with crypto custody.

ETF analyst James Seyffart echoed the positive sentiment, tweeting, "Didn’t even need an executive order! Thank you Hester Peirce and Chairman Uyeda! This was the correct decision IMO."

This updated guidance allows more banks to offer Bitcoin custody services securely and practically by accounting for potential losses as contingent liabilities. Banks now have more flexibility in how they hold and safeguard crypto for their clients.

Shifting US Crypto Regulations

The crypto community has reacted enthusiastically to this news. For years, US banks have desired to provide Bitcoin custody but lacked regulatory clarity. This decision follows a May 2024 resolution in both the House and Senate to repeal SAB 121, which was subsequently vetoed by President Biden.

The timing is noteworthy, coming after the SEC established a crypto task force led by Hester Peirce. This, coupled with President Trump's recent executive order suggesting the creation of a national digital asset stockpile, indicates a broader shift in US crypto regulation. This creates a positive climate for growth within the US crypto industry.

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