SEC Revokes Controversial Crypto Accounting Rule
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SEC revokes rule requiring firms to classify digital assets as liabilities, easing burdens on the crypto industry - IcoHolder.
In a significant move, the U.S. Securities and Exchange Commission (SEC) has decided to revoke the much-debated rule that required financial firms to classify digital assets held on behalf of customers as liabilities on their balance sheets. The decision, announced on January 23, rescinds the interpretive guidance of the rule known as SAB 121, which had been implemented in March 2022.
The move comes after sustained pushback from the crypto industry, which argued that the rule created unnecessary administrative burdens. According to the SEC's announcement, the decision to rescind SAB 121 was made in response to concerns raised by the industry and other stakeholders.
SEC Commissioner Hester Peirce, a vocal advocate for crypto, celebrated the decision, commenting on social media, “Bye, bye SAB 121! It’s not been fun.” The controversial rule had required firms holding digital assets to report them as liabilities, creating challenges for financial firms engaged in crypto custody. Critics of the rule, including lawmakers, said it hindered innovation in the digital asset sector and was detrimental to the U.S. banking industry’s ability to engage in crypto-related services.
One of the rule’s harshest critics, House Financial Services Committee Chair French Hill, expressed relief over its repeal. Hill argued that holding reserves against crypto assets in custody was not a common practice in financial services, adding that the rule was a misguided attempt to regulate the industry. Senator Cynthia Lummis also welcomed the move, calling SAB 121 “disastrous” for both the banking sector and the development of digital assets in the U.S.
The SEC's decision follows earlier legislative efforts to repeal the rule. While a bill to undo SAB 121 initially garnered bipartisan support, it was vetoed by then-President Joe Biden in June 2023. The House later failed to override the veto, falling short by 60 votes.
This move by the SEC marks a critical shift in the agency’s stance on crypto, signaling a more industry-friendly approach under the leadership of acting SEC Chair Mark Uyeda. The decision is seen as a step toward aligning regulatory policies with the needs of the rapidly evolving digital asset sector.