The U.S. Securities and Exchange Commission (SEC) has officially axed the controversial Staff Accounting Bulletin 121 (SAB 121), removing it via a new policy, SAB 122.

This development means that mainstream financial institutions in the United States can now hold crypto.

Updated Framework

According to the new bulletin, financial entities must now disclose the risks and obligations associated with safeguarding crypto assets. Although early adoption is permitted, these changes will apply retroactively to fiscal years beginning after December 15, 2024.

Bank of America CEO Brian Moynihan recently stated that U.S. financial institutions are prepared to embrace the opportunity to custody crypto assets, provided there are improvements in the regulatory framework.

Several notable figures in the industry celebrated the move, attributing it to the newly inaugurated Trump administration. House Financial Services Committee Chairman French Hill was quoted in an X post saying:

“Finally, the Biden-Harris misguided SAB 121 rule has been rescinded. Holding reserves against the assets held in custody is NOT standard financial services practice, and I am pleased this rule was nullified.”

He further applauded the financial watchdog for its swift action under the new dispensation, calling it a step forward for digital assets and innovation in America.

SEC Commissioner Hester Peirce also celebrated the development by writing on social media: “Bye, bye SAB 121! It’s not been fun.” The changes follow some leadership adjustments at the agency, with Commissioner Mark Uyeda recently taking on the role of chair in an acting capacity.

The interim leader has adopted a different approach than his predecessor, Gary Gensler, whose tenure was criticized for enforcing strict rules on the industry. Uyeda had previously called for a shift in the regulators handling of crypto guidelines, and this decision aligns with his stated goals.

A Controversial Rule Reversed

SAB 121, introduced in March 2022, required financial firms holding digital assets for customers to classify them as liabilities on their balance sheets. This condition was widely criticized for its complex and burdensome reporting standards, which many argued made crypto custody unnecessarily difficult for banks and associated institutions.

In May 2024, a bipartisan group of U.S. lawmakers passed a resolution to overturn SAB 121, but President Biden vetoed the bill, defending the SEC’s judgment. Later in September, a group of Republican lawmakers wrote to then-Chair Gensler, demanding the rule be rescinded.

Meanwhile, Donald Trump recently signed his first crypto executive order to establish the Presidential Working Group on Digital Assets Markets. The initiative is tasked with developing a framework to address the crypto regulatory landscape.

The group is also responsible for creating a strategic national digital asset stockpile, with the wording suggesting it may consist of more than just Bitcoin, as initially thought.