Staff Accounting Bulletin 122, which replaces the SAB 121 that was widely criticized by the US Securities and Exchange Commission has been introduced.
A Jan. 23, 2019 update stated that this will solve regulatory issues which previously hindered crypto custody.
SAB 121
SAB 121 introduced by Gary Gensler (former SEC chair) required that firms providing crypto custody services classify client assets as liabilities on balance sheets.
The move has been criticized as creating unnecessarily complex regulations and discouraging banks from joining the crypto-custody market. It was generally believed that the policy would prevent a wide-scale adoption of services for digital assets.
In the past, attempts to repeal SAB 121 were supported by both parties but met with failures. Former President Joe Biden, despite the bill passing both chambers in Congress, vetoed it. A subsequent attempt to override his veto failed.
SAB 122
SAB 122, the new SAB, effectively rescinds those controversial provisions. It offers a more flexible framework.
Financial institutions are now able to adhere to the established standards of the Financial Accounting Standards Board, or any other international accounting guidelines.
The SEC further stressed the importance of disclosures, encouraging firms to make them available so that investors can understand how cryptocurrency held by others on behalf of other people is protected.
The bulletin states:
“An entity that has an obligation to safeguard crypto-assets for others should determine whether to recognize a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in Financial Accounting Standards Board Accounting Standards Codification.”
The policy change, implemented under the leadership of President Donald Trump, and Mark Uyeda as acting SEC chair, is a significant step in fostering an environment more conducive to digital assets.
Move welcomed by community
Regulators and crypto industry players have welcomed the introduction of SAB 122.
Hester P. Peirce is a SEC commissioner who, as a proponent of balanced crypto regulations, has expressed her support, reflecting the relief that the entire sector feels.
US lawmakers also have praised this move. French Hill, the Chair of House Financial Services Committee in the House, called out SAB 121’s previous rule for being inconsistent with financial standards. Meanwhile Senator Cynthia Lummis emphasized that it had a negative impact on innovation and bank.
Crypto leaders noted that SAB 121’s removal will probably influence the way companies report and disclose their custody obligations.
Michael Saylor from MicroStrategy noted that banks can now offer Bitcoin storage while still meeting more straightforward regulatory requirements.
“He wrote:
“SAB 121 has been rescinded, allowing banks to custody Bitcoin.”
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