SEC Revokes Crypto Accounting Guidance in Policy Shift
The U.S. Securities and Exchange Commission (SEC) announced on Thursday its decision to rescind the 2022 accounting guidance known as Staff Accounting Bulletin 121 (SAB 121). This move, welcomed by the cryptocurrency sector, marks an early pivot by President Donald Trump’s administration away from the policies of the previous administration.
The guidance, which required companies to account for digital assets held for customers as liabilities, faced significant opposition from the crypto industry. Critics argued it imposed unnecessary costs and barriers, stifling growth in the sector.
Industry Pushback Against SAB 121
SAB 121, introduced under former SEC Chair Gary Gensler, was designed to protect investors during bankruptcies, a frequent concern in the crypto industry. However, crypto-friendly lawmakers and industry leaders criticized it as overly burdensome. The measure was blocked from repeal in May 2023 under the Biden administration, but its withdrawal now signals a shift in regulatory priorities.
Banking Industry Welcomes Policy Change
The banking sector also praised the SEC’s decision, highlighting the potential for financial institutions to re-engage with digital assets. Paige Pidano Paridon, co-head of regulatory affairs at the Bank Policy Institute, expressed support, stating that the decision allows banks to once again provide secure custody services for digital assets.
The reversal may encourage traditional financial institutions to explore opportunities in the cryptocurrency market, offering greater options to customers and increasing market confidence.
SEC Launches Crypto Task Force
In a related development, the SEC announced the formation of a new crypto task force, led by Republican Commissioner Hester Peirce. Peirce, a longtime advocate for pro-crypto policies, celebrated the revocation of SAB 121 on social media, stating, “Bye bye, SAB 121! It’s not been fun!”
The task force’s formation highlights the agency’s shift toward a more open approach to cryptocurrency regulation. Observers are optimistic this new direction will foster innovation and address industry concerns more collaboratively.
What the Revocation Means for the Crypto Industry
It reduces operational costs for companies offering digital asset custody services and may encourage broader adoption of cryptocurrencies by traditional financial institutions.
The SEC’s actions signal an effort to recalibrate its approach to crypto regulation, reflecting a balancing act between investor protection and fostering innovation. Market participants are now closely watching how the new task force will address ongoing challenges in the fast-evolving crypto space.