SEC Loosens SAB 121 Guidelines, Paving the Means for Banks to Enter Crypto Custody Market

• The SEC has supplied steerage permitting banks to bypass SAB 121 crypto custody guidelines.
• Banks can now supply crypto asset custody by assembly particular regulatory circumstances.
• This transfer opens doorways for institutional crypto custody however raises equity considerations for crypto-native companies like Coinbase.

The U.S. Securities and Change Fee (SEC) has supplied new steerage that might enable banks to supply crypto asset custody companies with out adhering to strict accounting necessities underneath Workers Accounting Bulletin No. 121 (SAB 121). 

SEC Chief Accountant Paul Munter introduced the brand new pointers in a speech on September 9, paving the way in which for banks to enter the digital asset market.

Background on SAB 121

SAB 121, launched by the SEC in 2022, requires public firms to account for digital property held for shoppers on their stability sheets. The regulation poses dangers for banks, because it may classify their prospects as unsecured collectors if a custodian goes bankrupt. 

This rule has prevented many banks from offering crypto custody companies attributable to extra capital necessities and regulatory hurdles.

Legislative Actions Problem SAB 121

In Might 2024, th…

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