A great victory for the crypto world! The U.S. SEC announces the abolition of 'encryption currency accounting standard SAB 121'.

The U.S. Securities and Exchange Commission (SEC) announced on Thursday that it is formally withdrawing the controversial Staff Accounting Bulletin No. 121 (SAB 121), which requires Financial Institutions and companies that custody encryption assets to classify customers' encryption assets as company liabilities. This has put significant pressure on the financial structure of businesses, thus causing a strong Rebound since its introduction.

According to the provisions of 'SAB 121', banks and listed companies must include customers' encryption assets in their balance sheets. However, the latest 'Staff Accounting Bulletin No. 122 (SAB 122)' explicitly states that the interpretive guidance is revoked and accounting treatment should be based on the relevant regulations of the Financial Accounting Standards Board (FASB) or International Accounting Standards (IAS).

Bye, bye SAB 121! It's not been fun: | Staff Accounting Bulletin No. 122

— Hester Peirce (@HesterPeirce) January 23, 2025

The SEC also reminds businesses in the statement that 'relevant companies still need to comply with existing information disclosure requirements to ensure that investors understand clearly the obligations of the company to hold encryption assets for others.'

Why is SAB 121 so controversial?

"SAB 121" was promoted by former SEC chairman Gary Gensler of the United States, with the aim of protecting the rights and interests of investors in the event of a Financial Institution bankruptcy. In an interview with Reuters in 2023, Gary Gensler emphasized, "In multiple bankruptcy cases, the court has repeatedly recognized that encryption assets are not assets immune to bankruptcy risks."

However, 'SAB 121' has been widely criticized by the encryption currency industry since its introduction. Operators believe that directly including customer assets in the enterprise's balance sheet undoubtedly increases the risk and burden of the enterprise.

Last year, Congress attempted to repeal 'SAB 121', and the House of Representatives passed the relevant bill with 228 votes in favor and 182 votes against. Supporters were mainly from the Republican Party, with 21 Democratic members joining the affirmative camp. The Senate subsequently passed it with 60 votes in favor and 38 votes against. However, the bill was ultimately vetoed by then President Joe Biden.

Hester Peirce, a commissioner of the US SEC who was recently appointed as the head of the 'encryption Currency Regulation Special Task Force', has always opposed 'SAB 121'. She believes that this guideline does not take into account the long-term lack of clear regulations provided by the SEC on how encryption currencies should be applied to securities laws, and it is not appropriate to address such issues only in the form of accounting announcements.

This article was first published in "Block Times".