SEC Repeals SAB 121: Paving the Way for US Banks to Manage Digital Assets

In a landmark decision, the U.S. Securities and Exchange Commission (SEC) has repealed Staff Accounting Bulletin No. 121 (SAB 121), allowing U.S. financial institutions greater freedom to manage digital assets such as Bitcoin. This move, implemented through the issuance of SAB 122, marks a significant regulatory shift under the Trump administration, signaling a more crypto-friendly approach in the financial landscape.

The Original SAB 121: A Restrictive Framework

Introduced in March 2022, SAB 121 aimed to regulate how companies accounted for crypto-assets held on behalf of customers. The guidance required entities, including banks and exchanges, to:

• Recognize a safeguarding liability and corresponding asset on their balance sheets, measured at the fair value of the custodied crypto-assets.
• Comply with stringent disclosure requirements regarding the nature, amount, and associated risks of these assets.

While intended to enhance transparency and risk management, SAB 121 faced criticism for its rigidity. Critics argued that its requirements imposed undue financial burdens on institutions holding crypto-assets, effectively discouraging them from offering custody services.

Also read: The US Crypto Advisory Council: Trump’s Strategic Move to Make America the World’s Crypto Center

The Repeal and Introduction of SAB 122

On January 23, 2025, the SEC officially repealed SAB 121 with the introduction of SAB 122. This pivotal change removes the requirement for banks to record customer-held crypto-assets as liabilities on their balance sheets. Instead, institutions can now account for potential risks associated with safeguarding digital assets, such as theft or fraud, as contingent liabilities.

This streamlined approach significantly reduces the compliance and capital requirements previously hindering financial institutions. SEC Commissioner Hester Peirce, a vocal advocate for crypto innovation, celebrated the decision, stating, “Bye, bye SAB 121! It’s not been fun.”

Implications for U.S. Banks and the Crypto Industry

The repeal of SAB 121 is a game-changer for the banking sector. Banks and traditional financial institutions can now; safely and feasibly offer crypto custody services without burdensome regulatory constraints, maintain greater flexibility in determining how to account for safeguarding risks.

This decision aligns with a broader shift in U.S. crypto regulations, fostering an environment conducive to innovation and growth. Prominent figures in the crypto community, including MicroStrategy’s Michael Saylor, have expressed enthusiasm, highlighting the potential for expanded institutional adoption of Bitcoin and other digital assets.

Also read: Trump Pardons Ross Ulbricht: A Moment Bitcoiners Won’t Forget

A Broader Pro-Crypto Agenda

The repeal of SAB 121 is part of a wave of pro-crypto measures under the Trump administration. 

Notably:

• The SEC has formed a dedicated crypto task force led by Commissioner Hester Peirce.
• President Trump signed an executive order advocating for a U.S. digital asset stockpile.
• Congress has demonstrated bipartisan support for reducing barriers to crypto adoption, though earlier efforts to repeal SAB 121 faced a presidential veto under the Biden administration.

Conclusion

With the repeal of SAB 121 and the introduction of SAB 122, U.S. banks are now empowered to manage digital assets with fewer regulatory hurdles. This marks a significant step toward integrating cryptocurrencies into mainstream financial systems, reflecting a regulatory shift that prioritizes flexibility and innovation. As the U.S. positions itself as a leader in the global crypto landscape, the banking industry is poised to play a pivotal role in shaping the future of digital asset custody.

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FAQs

What is SAB 121, and why was it repealed?

SAB 121 was introduced in 2022 to regulate how banks accounted for crypto-assets held on behalf of customers, requiring institutions to list digital assets as liabilities. It was repealed in January 2025 with the introduction of SAB 122, offering banks more flexibility in managing crypto assets without burdensome accounting requirements.

How does the repeal of SAB 121 affect U.S. banks?

The repeal enables U.S. banks to offer crypto custody services with fewer regulatory constraints. Banks can now account for risks associated with digital assets as contingent liabilities, making the process more manageable and fostering greater adoption of cryptocurrencies.

What are the broader implications of this regulatory shift?

The repeal of SAB 121 is part of a broader pro-crypto agenda under the Trump administration, aimed at advancing digital asset adoption. This change is expected to spur institutional interest in cryptocurrencies, improving the U.S.'s position in the global crypto market.