The U.S. Securities and Exchange Commission (SEC) repealed Staff Accounting Bulletin 121 (SAB 121) related to crypto accounting, simplifying the process of reflecting digital assets on corporate balance sheets.
The SEC rescinded the SAB 121 crypto accounting policy, which was in effect since March 2022. SAB 121 required financial companies holding cryptocurrencies on behalf of clients to report those assets as liabilities on their balance sheets. With its repeal, companies can now more efficiently account for digital assets, making their inclusion on corporate balance sheets more economically viable.
Under the new guidelines, companies responsible for custody of crypto-assets must assess the need to recognize loss risks and evaluate corresponding liabilities under existing contingent liability accounting rules (FASB ASC 450-20 or IAS 37).
The repeal will apply retroactively for annual reporting periods starting after December 15, 2024, with early adoption permitted. Companies transitioning to the new rules must disclose the impact of the accounting policy change and continue providing transparent information to keep investors informed about corporate obligations related to crypto-asset custody.
In 2024, legislation proposing the repeal of SAB 121 gained bipartisan support in the U.S. House of Representatives and Senate. However, Joe Biden vetoed the bill on June 1, and legislators failed to gather the required votes to override the veto.
It’s worth noting that Jeremy Allaire, CEO of Circle, previously said that, upon assuming office, Donald Trump might issue an order enabling banks to offer crypto custody, investment, and trading services, as well as repealing SAB 121.
