The US SEC revokes SAB 121, a controversial accounting rule added in 2022 that forced banks to treat BTC and other tokens as a liability on their balance sheets
After years of lobbying by the crypto industry, the U.S. Securities and Exchange Commission has rescinded an accounting rule …
Context & Ripple Effects
SAB 121 had already become a focal point in the fight over how regulated institutions can handle crypto: an earlier congressional effort to overturn it was stopped by the 2024 veto of a SAB 121 repeal measure.
The rescission reverses a custody-specific accounting constraint while the SEC's earlier work also sought to extend oversight to digital-asset and DeFi exchanges through a reopened exchange-rule proposal. That makes this a meaningful shift in the practical terms of institutional crypto participation, not merely a change in disclosure language.
First-order effects
- Banks that custody BTC and other tokens are no longer required by SAB 121 to record those assets as balance-sheet liabilities, removing the rule's direct accounting burden.
- The SEC and bank custody programs must adjust their reporting and control processes to the rescinded bulletin rather than its 2022 treatment.
Second-order effects
- Banks that had limited or deferred crypto-custody offerings because of the balance-sheet impact can reassess those products, increasing pressure on specialist custodians to compete on service, controls and pricing.
- The change reduces one obstacle to bringing crypto custody inside regulated banking channels, even as other SEC initiatives continue to address where and how digital assets may be held.
Third-order effects
- If followed by durable rules rather than case-by-case guidance, the move could shift crypto custody toward conventional financial-institution infrastructure and narrow the broader SEC rollback of Biden-era crypto rules into a wider change in market access.
- The boundary between crypto-specific safeguards and ordinary financial regulation remains unsettled: removing an accounting constraint does not itself resolve exchange, adviser-custody, or DeFi oversight.
The trend: This is one data point in a shift from crypto-specific restrictions toward reassessing how digital-asset activity fits within established financial institutions.