SEC rescind SAB 121
27 January 2025 US
Image: stock.adobe.com/Tada Images
Last week, the US Securities and Exchange Commission (SEC) announced the withdrawal of its Staff Accounting Bulletin (SAB) 121.
The rule had required reporting entities that act as custodians for crypto assets to include safeguarding liabilities and the corresponding assets as footnotes to financial statements.
While President Biden had vetoed a bill to overturn the controversial rule, the inauguration of Donald Trump has brought a new approach towards regulation of the crypto custody markets.
The SEC had said that the bulletin adds guidance for entities “to consider when they have obligations to safeguard crypto-assets held for their platform users”.
The new directive, SAB 122, supersedes SAB 121 and allows financial institutions greater discretion in classifying held digital assets as liabilities.
The SEC explains: “An entity that has an obligation to safeguard crypto-assets for others should determine whether to recognise a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board Accounting Standards Codification.”
The rule had required reporting entities that act as custodians for crypto assets to include safeguarding liabilities and the corresponding assets as footnotes to financial statements.
While President Biden had vetoed a bill to overturn the controversial rule, the inauguration of Donald Trump has brought a new approach towards regulation of the crypto custody markets.
The SEC had said that the bulletin adds guidance for entities “to consider when they have obligations to safeguard crypto-assets held for their platform users”.
The new directive, SAB 122, supersedes SAB 121 and allows financial institutions greater discretion in classifying held digital assets as liabilities.
The SEC explains: “An entity that has an obligation to safeguard crypto-assets for others should determine whether to recognise a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board Accounting Standards Codification.”
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