Crypto Gets a Win! SEC Ditches Controversial SAB 121 Rule

“Bye-bye, SAB 121! It’s not been fun,” tweeted SEC Commissioner Hester Pierce, celebrating the U.S. regulator’s decision to withdraw the controversial 2022 accounting guidance. This rule required companies to report customers’ crypto assets on their balance sheets, a move that many in the cryptocurrency industry found burdensome.

For the crypto community, this change is a breath of fresh air, with many expressing their excitement on social media. But why did this rule spark so much controversy?

What Was SAB 121 and Why Was It a Problem?

SAB 121, introduced in 2022, was designed to address risks related to customers’ crypto assets. It required companies to list customer crypto holdings on their balance sheets, helping investors understand potential risks like theft or misuse.

While the rule aimed to increase transparency, it created several issues. It led to inflated balance sheets, making it harder for companies to assess their financial health. Banks, facing stricter capital reserve requirements due to the larger balance sheets, found it more difficult to offer crypto custody services.

Crypto companies like Coinbase and Robinhood also struggled with the operational challenges caused by these expanded balance sheets.

In 2024, U.S. Congress tried to overturn SAB 121, with lawmakers voting to cancel the rule. However, Former President joe biden joe biden Joe Biden President vetoed this decision, keeping the rule in place for a time.

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Hester Peirce Praises the SEC’s Decision

Following the SEC’s decision to repeal the rule, Hester Peirce – recently appointed to lead a crypto task force aimed at creating a clear and balanced regulatory framework – expressed her approval. She believes the repeal of SAB 121 is a positive step for the industry.

Better Regulations, More Growth

The repeal of SAB 121 is a significant move for the cryptocurrency sector. By reducing regulatory burdens on companies and banks, the SEC has created a clearer path for growth and smoother operations.

With Peirce leading the charge toward more practical and transparent regulations, the industry is on track for a stronger, more balanced future.