U.S. President Donald Trump has announced significant investments and initiatives aimed at accelerating the adoption and integration of digital assets within mainstream financial systems. This move coincides with the U.S. Securities and Exchange Commission’s recent repeal of Staff Accounting Bulletin No. 121, paving the way for banks to offer crypto custody services under the newly established Staff Accounting Bulletin No. 122.
The SEC’s decision to rescind SAB 121 marks a pivotal change in the regulatory landscape for digital assets. Issued initially in 2022, SAB 121 mandated that companies holding cryptocurrency assets on behalf of customers record these assets as liabilities on their balance sheets. This stringent requirement was widely criticized for making crypto custody services financially untenable, leading many banks and financial institutions to shy away from offering such services due to the associated economic burdens.
In a recent announcement on X, SEC Commissioner Hester Peirce declared, “Bye, bye SAB 121! It’s not been fun,” signaling the agency’s intent to foster a more accommodating environment for crypto-related financial services.
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The repeal of SAB 121 and the introduction of SAB 122 offer greater accounting flexibility, enabling banks to utilize established accounting principles to assess and record potential risks associated with holding customer crypto assets. This change significantly reduces the compliance burden, making it more feasible for regulated banks to provide crypto custody services.
The transition to SAB 122 is spearheaded by Peirce and acting SEC Chairman Mark Uyeda, who are leading a newly formed crypto task force. This group aims to develop proactive regulatory frameworks and practical pathways for cryptocurrency registration, following the departure of former SEC Chair Gary Gensler.
Under SAB 122, financial institutions can now treat potential losses from custodied crypto assets as contingent liabilities rather than immediate balance sheet liabilities. This adjustment allows companies more flexibility in managing their financial statements and encourages the expansion of crypto custody services. Consequently, banks can more readily offer services for major cryptocurrencies like Bitcoin and Ethereum, enhancing custody options for consumers.
The repeal of SAB 121 follows significant legislative efforts earlier in 2024, when Representative Mike Flood introduced H.J. Res. 109 under the Congressional Review Act. This resolution aimed to reverse the SEC’s restrictive guidance on crypto custody but was ultimately vetoed by former President Joe Biden. Biden cited concerns that reversing the SEC’s guidance could undermine the agency’s authority and pose risks to investors and consumers.
Industry stakeholders had long argued that SAB 121 disproportionately restricted banking organizations from providing digital asset services compared to other financial institutions. The financial community lauded the repeal, viewing it as a necessary step toward integrating cryptocurrency into traditional banking systems. Analysts believe that SAB 122 will not only alleviate the financial strains on banks but also spur innovation and competition within the crypto custody market.
Amid these regulatory changes, Trump is making headlines with his strategic investments and policy initiatives in the cryptocurrency sector. On January 23, 2025, Trump signed an executive order to create a cryptocurrency working group, fulfilling a campaign promise after he courted cash from digital asset companies pledging to be a “crypto president”.
This newly established crypto advisory council is expected to advise on digital asset policy, collaborate with Congress on crypto legislation, help establish Trump’s promised Bitcoin reserve, and coordinate efforts between key agencies, including the SEC, Commodity Futures Trading Commission, and the Treasury Department.
Information for this story was found via Reuters and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
