Analysis of SAB 121 Repeal and Its Impact

What is SAB 121?

SAB 121 (Staff Accounting Bulletin No. 121) is an accounting guidance issued by the U.S. Securities and Exchange Commission (SEC) in 2022. This guidance required financial institutions to record digital assets (cryptocurrencies) held on behalf of clients as liabilities on their balance sheets. This created significant challenges for banks in providing digital asset custody services.

Repeal of SAB 121

Recently, the SEC repealed SAB 121. This means that banks are no longer prohibited from holding digital assets. This repeal was achieved through efforts by the Trump administration and was a top priority for the digital asset industry.

Impact of the SAB 121 Repeal

1.  Expansion of Digital Asset Custody Services: With the repeal of SAB 121, banks can now hold digital assets, which is expected to lead to more banks offering digital asset custody services.
2.  Promotion of Business Activities: Allowing banks to hold digital assets will likely stimulate business activities, promoting the financialization of digital assets and encouraging more companies to use them.
3.  Regulatory Changes: The repeal of SAB 121 significantly shifts the SEC's regulatory direction for digital assets, with a new task force established to develop clearer and more practical regulatory frameworks.

Conclusion

The repeal of SAB 121 is expected to have a significant impact on the digital asset industry. By allowing banks to hold digital assets, the financialization of digital assets will advance. Additionally, this change will influence the SEC's regulatory approach, contributing to the development of clearer and more practical regulatory frameworks.