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The U.S. Securities and Exchange Commission (SEC) has revoked Staff Accounting Bulletin 121 (SAB 121) related to cryptocurrency accounting, streamlining the process of representing digital assets on corporate balance sheets.
The SEC has annulled the SAB 121 cryptocurrency accounting regulation, which had been in place since March 2022. SAB 121 mandated that financial institutions holding cryptocurrencies on behalf of clients categorize these assets as liabilities on their balance sheets. With its annulment, companies can now more effectively account for digital assets, making their inclusion on corporate balance sheets more financially feasible.
Under the revised guidelines, firms responsible for the custody of crypto-assets must evaluate the necessity to recognize loss risks and assess related liabilities under existing contingent liability accounting standards (FASB ASC 450-20 or IAS 37).
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The repeal will be retroactively applicable for annual reporting periods commencing after December 15, 2024, with early adoption allowed. Companies transitioning to the new regulations must disclose the impact of the accounting policy change and continue to provide transparent information to keep investors informed about corporate responsibilities related to crypto-asset custody.
In 2024, legislation proposing the repeal of SAB 121 received bipartisan support in the U.S. House of Representatives and Senate. However, Joe Biden vetoed the bill on June 1, and lawmakers were unable to gather the necessary votes to override the veto.
It is noteworthy that Jeremy Allaire, CEO of Circle, previously stated that, upon taking office, Donald Trump could issue an order allowing banks to offer crypto custody, investment, and trading services, as well as repeal SAB 121.
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