In a groundbreaking development, the U.S. Securities and Exchange Commission (SEC) has officially revoked Staff Accounting Bulletin (SAB) No. 121. This contentious regulation had long prevented financial institutions from providing custody solutions for bitcoin and cryptocurrency. Announced on Thursday, this decision marks a pivotal change in the SEC’s stance on bitcoin and crypto regulation, setting the stage for enhanced financial integration.
BREAKING: 🇺🇸 SEC OFFICIALLY RESCINDS SAB 121, WHICH PREVENTED BANKS FROM CUSTODYING #BITCOIN pic.twitter.com/VCnggkCGmL
— Bitcoin Magazine (@BitcoinMagazine) January 23, 2025
https://platform.twitter.com/widgets.js
Initially introduced in March 2022 by former SEC Chair Gary Gensler, SAB 121 mandated that institutions holding bitcoin and crypto assets on behalf of clients had to classify those holdings as liabilities on their financial statements. This accounting directive imposed heavy operational and financial constraints on banks and custodians, significantly discouraging them from exploring bitcoin-related offerings. The rule received widespread backlash from the cryptocurrency sector and legislators, with SEC Commissioner Hester Peirce notably labeling it a “harmful weed” in April 2023.
“Goodbye, SAB 121! It hasn’t been enjoyable,” Peirce tweeted on X (formerly Twitter) following the SEC’s release of Staff Accounting Bulletin No. 122, which formally abolishes the previous guidance.
The SEC’s decision to abolish SAB 121 follows closely on the heels of Gensler’s resignation and signifies the beginning of a new chapter under Republican leadership. Acting SEC Chair Mark Uyeda, who took office on Monday, immediately announced the establishment of a cryptocurrency task force led by Peirce, aimed at formulating clearer and more effective regulatory approaches for the sector.
“So far, the SEC has predominantly relied on enforcement actions to regulate crypto in a retroactive and reactive manner, often using innovative and untested legal interpretations,” the agency stated in an announcement on Tuesday.
With the revocation of SAB 121, it is anticipated that leading banks will quickly begin to incorporate bitcoin and crypto custody solutions into their services. This marks a crucial advance in the financial mainstreaming of bitcoin, bringing it closer to widespread adoption.
