The U.S. Securities and Exchange Commission (SEC) has rescinded a controversial accounting rule that required banks to treat bitcoin and other cryptocurrencies as liabilities on their balance sheets. Staff Accounting Bulletin 121 (SAB 121), introduced in 2022, imposed stringent capital requirements on digital assets, significantly increasing the financial and regulatory burden for financial institutions offering crypto custody services. This, in turn, deterred many banks from entering the crypto space.
The rule’s impact was felt across Wall Street, where banks faced higher operational costs and tighter regulations that limited their involvement with cryptocurrencies. Efforts to overturn SAB 121 gained bipartisan support in Congress last year, although a veto from then-President Joe Biden left the measure intact, further hindering banks from expanding their crypto offerings.
In a recent shift, the SEC made the decision to revoke SAB 121, drawing praise from crypto advocates. SEC Commissioner Hester Peirce, a vocal critic of the rule, shared her enthusiasm on X (formerly Twitter), saying, “Bye, bye SAB 121! It’s not been fun.” The announcement came just days after Gary Gensler, the former SEC Chair who had defended the rule, stepped down from his position. Gensler had argued that the rule was essential for protecting investors in the event of crypto firm bankruptcies.
With the removal of this rule, banks may find it easier to re-enter the crypto space, potentially expanding their offerings beyond just derivatives and exchange-traded funds (ETFs), and reviving Wall Street’s interest in digital assets.