The U.S. Securities and Exchange Commission (SEC) has withdrawn the controversial SAB 121 crypto accounting guidance following the departure of former chairman Gary Gensler. This decision marks a significant shift in the regulatory landscape for cryptocurrency, which has drawn mixed reactions since its inception.
Withdrawal of SAB 121
The SEC announced the retraction of SAB 121, originally published in 2022, coinciding with the release of Staff Accounting Bulletin No. 122. SAB 121 mandated that firms holding cryptocurrencies on behalf of clients classify these digital assets as liabilities in their financial statements.
Criticism and Legal Challenges
SAB 121 faced backlash from both the crypto industry and lawmakers, who argued that it increased compliance costs and hindered banks from providing digital asset custody services. The SEC clarified that organizations should continue to rely on standards from the Financial Accounting Standards Board (FASB) or the International Accounting Standards (IAS) for crypto asset accounting.
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