Regulation
SEC reportedly accepted SAB 121 exceptions to cryptocurrency accounting rules for banks and brokers
The U.S. Securities and Exchange Commission (SEC) has reportedly accepted a proposal with exceptions for certain institutions covered by the controversial Staff Accounting Bulletin No. 121 (SAB 121), according to Bloomberg Setup.
The SEC has allowed some banks and brokerage firms to evade financial reporting through new business practices that provide exceptions to cryptocurrency accounting compliance guidelines.
Under this agreement, financial institutions will not report customers’ cryptocurrency holdings as liabilities on their balance sheets. SAB121 stipulations. However, they must protect their clients’ assets in the event of bankruptcy or insolvency.
Furthermore, institutions would be required to implement internal safeguards to address legal risks related to the emerging sector.
Market observers have noted that this move will expand custody options for U.S. cryptocurrency holders and attract more traditional financial institutions into the cryptocurrency space.
SAB121
This development comes more than two years after the SEC introduced the controversial SAB 121 directive, which was intended to ensure greater transparency and better risk management in the rapidly evolving cryptocurrency industry.
The regulation requires the recognition of custody obligations as liabilities in balance sheets and requires detailed information on their nature and risks associated with them.
However, the implementation of SAB 121 has raised significant concerns. Many industry stakeholders see the regulation as overreach by the SEC. They argue that it imposes undue burdens on companies and could stifle innovation.
Critics also point out that the regulation does not adequately distinguish between cryptocurrencies on public ledgers and traditional assets on permissioned ledgers, complicating compliance efforts.
As a result, U.S. lawmakers have recently he tried to overturn the warningHowever, their efforts were thwarted when President Joe Biden I placed the veto the resolution. A subsequent attempt to counter the President’s veto also failedas legislators failed to reach the required threshold.