The United States Securities and Exchange Commission issued a new Staff Accounting Bulletin on Thursday, thereby withdrawing the contentious SAB 121. SAB 121 had instructed banks and other publicly traded companies to record their customers' cryptocurrency assets on their own balance sheets.
In its place, SAB 122 rescinds the previous interpretive guidance and instead advises firms to adhere to Financial Accounting Standards Board rules or International Accounting Standard provisions. The notice issued on Thursday reminded entities to continue providing disclosures that enable investors to comprehend an entity's obligation to safeguard cryptocurrency assets held on behalf of others.
The now-rescinded guidance, SAB 121, had been supported by former SEC Chairman Gary Gensler, who argued it would protect investors in the event of bankruptcies. Gensler had stated, 'What we have found, time and again, in bankruptcy court, is that crypto assets are not bankruptcy remote.' However, the crypto industry largely criticized SAB 121, and it became the subject of a Congressional Review Act resolution passed by both the House and Senate, although the resolution was ultimately vetoed by former President Joe Biden.
SEC Commissioner Hester Peirce, who was recently appointed to lead a new cryptocurrency task force, has long been opposed to the guidance. Peirce had argued that the guidance failed to account for the lack of SEC guidance on the application of securities laws to cryptocurrency and that an accounting bulletin was not the appropriate vehicle for the type of guidance provided in SAB 121. The withdrawal of SAB 121 was announced by Peirce on Thursday.