SEC Repeals SAB 121, Opening the Floodgates for Banks to Enter the Crypto Market

The SEC has repealed SAB 121, ending a saga involving a congressional bill and a presidential veto. This opens new possibilities for traditional financial institutions, that are now free to offer crypto services involving custody to their customers.

SEC Repeals SAB 121, Opens New Era for Crypto in Traditional Finance

One of the last obstacles barring cryptocurrency assets from going mainstream might have been lifted. The Securities and Exchange Commission (SEC), under the leadership of acting chair Mark T. Uyeda, has withdrawn the guidance issued in Staff Account Bulletin 121 (SAB 121), which barred banks from offering crypto services due to the commission’s requirements.

In its latest Staff Account Bulletin 122, the commission declares that it “rescinds the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users.”

The bulletin, first introduced in March 2022, was criticized for its pernicious effect on the advancement of crypto in banking environments. It forced these environments to consider crypto volumes as part of the banks’ balance sheet, with associated high-cost implications.

The bulletin was also the center of a congressional war with the executive. Earlier this year, a Congressional Review Act (CRA) was passed with bipartisan support to end SAB 121. Nonetheless, former President Biden vetoed the initiative, stating that signing it would “inappropriately constrain the SEC’s ability to set forth appropriate guardrails and address future issues.”

Read more: US Congress Passes First Standalone Crypto Legislation

Read more: President Biden Vetoes SEC SAB 121 Repeal Resolution

SEC commissioner Hester Peirce, known in crypto circles as “crypto mom,” celebrated this event. “Bye, bye SAB 121! It’s not been fun,” said Peirce, who was against the stance taken by the SEC in SAB 121 since its issuance.

Pro-crypto Senator Cynthia Lummis also applauded the measure, noting that SAB 121 was “disastrous” for the banking industry, hindering innovation in the digital assets field in the U.S.

With this repeal, banks and other traditional financial institutions are free to include crypto services, including custody, to their customers, opening the doors for a massive influx of people to crypto channels.