SAB 121 Undone - Will Bank Regulations On Crypto Follow?

As we discussed in our Alert last summer, Staff Accounting Bulletin 121 of the U.S. Securities and Exchange Commission (SEC) placed a significant restraint on the ability of banks to maintain custody of cryptocurrency assets on behalf of customers by requiring a reporting company bank to reflect both an asset and a liability, for which it must reserve capital on its balance sheet even though it is not the owner of the crypto. By large margins, the House and the Senate took action last year to pass H.J. Res 109 disapproving of SAB 121, but then-President Joseph Biden vetoed the resolution, and it was not taken up by Congress again.

With President Donald Trump sworn into office last week and Gary Gensler no longer the chair of the SEC, the attitude of the SEC on the point has apparently shifted. In Staff Accounting Bulletin 122 issued on January 23, 2025, the SEC rescinded SAB 121 and removed reference to it in the SEC's Staff Accounting Bulletin Series.