In summary
The SEC’s new SAB 122 guidance removes the requirement for banks to treat customers’ crypto assets as liabilities, simplifying compliance.
This change allows banks to securely custody Bitcoin and other cryptocurrencies without incurring significant financial burdens.
The policy shift signals a pro-crypto stance in the US, with regulators easing restrictions and encouraging growth after years of hesitation.
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The SEC has issued Staff Accounting Bulletin (SAB) 122, rescinding prior guidance under SAB 121 that discouraged banks from holding Bitcoin in custody.
This means banks and traditional financial institutions can now offer cryptocurrency services without facing significant regulatory hurdles.
US Banks Can Custody Bitcoin
SAB 121 required companies holding crypto assets for their customers (like exchanges) to record both the asset and a liability for those assets on their balance sheets. Now, companies can assess their obligation to safeguard these assets differently, namely through potential liabilities, such as losses that could occur due to theft or fraud
“Goodbye SAB 121! Not a moment too soon | SAB 122,”
SEC Commissioner Hester Peirce wrote on X (formerly Twitter).
Simply put, SAB 122 removes the rigid requirement for banks to record crypto assets held by customers, such as Bitcoin, as liabilities on their balance sheets. This change simplifies compliance, easing the financial burden and capital requirements previously associated with crypto custody under SAB 121.
“Didn’t even need an executive order! Thank you Hester Peirce and Chair Uyeda! This is the right call in my opinion,”
ETF analyst James Seyffart wrote.
Overall, the new guidance makes it safer and more feasible for more banks to offer Bitcoin custody services by allowing them to only record potential losses as potential liabilities. Essentially, banks can now hold and safeguard crypto for their clients in a way they see fit. Companies have the freedom to decide whether they need to record a liability for safeguarding risks and how to measure it
Crypto Regulations in the US Are Changing
The crypto community is buzzing with excitement over this news. For years, US banks have wanted to custody Bitcoin but were unable to. MicroStrategy’s Michael Saylor also shared his enthusiasm on social media.
In May 2024, both the House and Senate passed a resolution to overturn SAB 121. However, President Joe Biden vetoed the resolution. This decision came after the SEC established a crypto task force led by Hester Peirce yesterday. The government has made a series of pro-crypto announcements today.
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