SEC revokes controversial rule SAB 121, paving way for Wall Street’s bitcoin and crypto adoption

The U.S. Securities and Exchange Commission (SEC) has officially repealed SAB 121, an accounting rule introduced in 2022 that required banks to classify bitcoin and other cryptocurrencies as liabilities on their balance sheets, according to a public notice posted on the SEC website.

This rule had long been a roadblock for Wall Street banks interested in holding digital assets, raising operational costs, and discouraging broader participation in the crypto market.

The SEC announced its decision to revoke the rule in a public notice, coming just days after Gary Gensler, the former SEC Chair and a strong advocate for the measure, stepped down. Gensler had maintained that the rule was essential for safeguarding investors in case of crypto firm bankruptcies.

“This staff accounting bulletin (“SAB”) rescinds the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users (“Topic 5.FF”),” the SEC said in the summary section of the notice.

SAB 121 came with strict capital requirements, making it costly and risky for financial institutions to offer crypto custody services. While efforts to overturn the rule gained bipartisan support last year, President Joe Biden vetoed proposed legislation to repeal it, leaving many banks hesitant to expand their crypto offerings beyond areas like derivatives trading and ETFs for wealth management clients, CNBC reported.

The SEC’s decision to scrap the rule comes shortly after Gary Gensler, the agency’s former chair and a staunch advocate of SAB 121, stepped down. Gensler had defended the rule, arguing it was necessary to protect investors from potential fallout in the event of crypto firm bankruptcies.

Hester Peirce, an SEC commissioner who has been vocal about the need for clearer crypto regulations, celebrated the change. Following the announcement, she shared on X, “Bye, bye SAB 121! It’s not been fun.” Peirce will now lead a newly created SEC task force focused on developing a comprehensive framework for crypto assets.

Bye, bye SAB 121! It’s not been fun: https://t.co/cIwUc0isUE | Staff Accounting Bulletin No. 122

— Hester Peirce (@HesterPeirce) January 23, 2025

The repeal has sparked optimism among some of the biggest names in finance. Speaking at the World Economic Forum in Davos, Goldman Sachs CEO David Solomon noted that the bank could revisit its approach to bitcoin ownership now that the regulatory landscape has shifted.

CEOs from Morgan Stanley and Bank of America shared similar sentiments, expressing interest in expanding their digital asset offerings if the new environment proves favorable.

This move aligns with President Donald Trump’s recent push for a more crypto-friendly regulatory tone, which could mark a significant shift for the financial sector. For Wall Street, the end of SAB 121 may open new doors to mainstream adoption of bitcoin and other digital assets.