US Banks Now Permitted to Custody Bitcoin
In a groundbreaking development, the US Securities and Exchange Commission (SEC) has announced the retirement of the highly contentious Staff Accounting Bulletin (SAB) 121, replacing it with the more accommodating SAB 122. This policy shift allows US banks to engage in the custody of Bitcoin and other digital assets, marking a significant milestone in the evolution of the crypto custody sector.
The Controversy Surrounding SAB 121
SAB 121, introduced during former SEC Chair Gary Gensler’s tenure, mandated that firms offering crypto custody services treat customer assets as liabilities on their balance sheets. This requirement was met with widespread criticism for its complexity and its deterrent effect on traditional financial institutions entering the crypto space. The repeal of SAB 121 had faced challenges in the past, with bipartisan support but unsuccessful attempts to override former President Joe Biden’s veto.
Enter SAB 122: A New Era for Crypto Custody
The introduction of SAB 122 signifies a paradigm shift towards a more supportive regulatory framework for digital assets. Financial institutions are now able to follow established standards from the Financial Accounting Standards Board (FASB) or other international accounting guidelines, enabling them to navigate the custodial landscape more effectively. Transparency is emphasized, with firms urged to provide disclosures that enhance investor understanding of how digital assets are protected on their behalf.
Reactions from the Community
The announcement of SAB 122 has been met with widespread approval from regulators, industry stakeholders, and lawmakers alike. SEC Commissioner Hester Peirce, known for her advocacy of balanced crypto regulation, lauded the move, echoing sentiments of relief throughout the sector. US legislators such as House Financial Services Committee Chair French Hill and Senator Cynthia Lummis have commended the decision, citing the outdated nature of SAB 121 and its adverse impact on innovation and banking practices.
Impact on the Industry
Leaders in the crypto space have highlighted the significance of the repeal of SAB 121, noting its implications for how companies account for and disclose their custodial responsibilities. Michael Saylor of MicroStrategy emphasized the newfound ability of banks to provide Bitcoin custody services within a clearer compliance framework, marking a pivotal moment for the industry’s evolution.
As the crypto custody sector celebrates this regulatory breakthrough, the path ahead appears more promising for financial institutions seeking to engage with digital assets in a more transparent and compliant manner. The retirement of SAB 121 and the introduction of SAB 122 signal a turning point in the regulatory landscape, paving the way for increased adoption and innovation in the crypto space.