Previous Guidance Rescinded
The U.S. Securities Exchange Commission (SEC) issued SAB 122 on Jan. 23, 2025, effectively reversing its 2022 guidance on safeguarding crypto-asset holdings. This change followed pressure from the American Bankers Association (ABA) and a joint congressional resolution to remove restrictions affecting banks and publicly traded entities.
In 2022, SAB 121 mandated SEC registrants to recognize liabilities for crypto assets held in custody. Critics argued it imposed heavy financial and operational burdens on banks and hindered innovation in digital asset products. The ABA claimed it limited banks’ competitiveness in the digital asset market. Although Congress tried to overturn the bulletin in 2024, President Biden vetoed the resolution.
A New Era In Crypto-Asset Reporting
SAB 122 rescinds SAB 121, representing a significant policy change. The bulletin eliminates the need to recognize custodial obligations as liabilities at fair value, simplifying financial reporting for banks and other SEC registrants. This decision aligns with the SEC’s broader objective of supporting digital asset innovation while maintaining oversight.
SEC Acting Chairman Mark Uyeda stated SAB 122 provides compliance clarity and encourages growth in the crypto sector. This reversal has several implications for banks and other public companies, including:
- Simplified reporting. Companies holding crypto assets in custody are not required to recognize fair-value liabilities, thereby lessening balance sheet complexity.
- Increased market participation. Eliminating the financial reporting barriers allows banks and businesses to develop and expand digital asset services.
- Increased regulatory oversight. The new crypto task force will conduct targeted reviews of compliance practices in the digital asset sector.
SAB 122 highlights the necessity for continued disclosures under existing SEC regulations. Shortly before releasing this bulletin, the SEC introduced a crypto task force aimed at developing a comprehensive regulatory framework for reporting crypto assets. SEC Commissioner Hester Peirce stated the intention of the task force is to collaborate with the public to create a regulatory environment that safeguards investors, promotes capital formation, ensures market integrity, and encourages innovation.
President Group On Digital Asset Market Introduced
On the same day SAB 122 was announced, President Trump signed an executive order forming a presidential group on digital asset markets. The group will create a federal regulatory framework for digital assets, propose a national digital asset stockpile, and suggest regulatory changes. The order bans the establishment of a central bank digital currency (CBDC) due to concerns about financial stability and privacy.
With pro-crypto nominees like Paul Atkins for SEC Chair and Howard Lutnick for Commerce Secretary, the White House aims to lead in digital asset innovation. The group must promote economic freedom, support stable coin growth, and submit its recommendations within six months.
Charting The Path Forward
The SEC’s efforts to reduce reporting complexities and establish a crypto task force show a balance between innovation and accountability. This move is well-received by the financial and business community.
Contact GBQ today to learn more about how you can align your reporting with the new guidelines and get ready for future crypto-asset opportunities and regulations.
Looking for additional crypto guidance? Check out these resources:
Now Or Later: When Should Your Company Implement The New Crypto Reporting Guidance?
Be Smart When Accepting Cryptocurrency Donations
21st Century Estate Planning Accounts For Digital Assets
