Banks Gain Flexibility As SEC Scraps Crypto Asset Accounting Mandate

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  • SEC repeals 2022 crypto accounting rule, removing balance sheet burdens for firms.
  • An initial vote to rescind the bulletin in 2024 was vetoed by then-President Joe Biden.
  • Trump admin launches Digital Assets Working Group to define crypto classifications.

The U.S. Securities and Exchange Commission (SEC) has officially rescinded Staff Accounting Bulletin No. 121, a regulatory measure that had significant implications for the crypto industry.

The guidance, issued in 2022, required companies to classify customers’ crypto assets as their own on balance sheets, creating compliance challenges for financial institutions.

Market participants had long argued that the rule discouraged banks from offering crypto custody services due to capital reserve requirements.

The repeal comes as part of a broader shift in digital asset regulation under the Trump administration, which also announced an executive order focused on regulatory clarity and stablecoin expansion.

SEC Repeals Crypto Accounting Rule

The SEC’s decision to reverse the 2022 bulletin follows persistent industry concerns about its impact on financial institutions and digital asset service providers.

The rule had mandated that companies include customers’ crypto holdings on their balance sheets, significantly inflating reported assets.

This accounting treatment affected firms such as Coinbase Global Inc. and Robinhood Markets Inc., which had to adjust financial disclosures accordingly.

Banks faced additional hurdles, as the guidance subjected them to higher capital requirements due to the expanded balance sheets.

Federal banking agencies impose stringent capital reserve obligations based on reported assets, making it more difficult for traditional institutions to offer crypto custody services.

Industry stakeholders viewed this requirement as a major barrier to mainstream financial sector participation in digital asset markets.

Despite prior congressional efforts to repeal the rule, an initial vote to rescind the bulletin in 2024 failed after then-President Joe Biden vetoed the measure.

The SEC’s latest action nullifies the controversial regulation, with Commissioner Hester Peirce welcoming the decision publicly. Meanwhile, House Financial Services Committee Chair French Hill characterized the prior rule as inconsistent with standard financial services practices.

Industry leaders, including MicroStrategy Executive Chairman Michael Saylor, acknowledged the repeal, posting the development on his official X account.

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source: X

New Approach Under Trump Administration

The repeal coincided with President Donald Trump signing an executive order aimed at clarifying the regulatory framework for digital assets.

The new administration established a Digital Assets Working Group, led by crypto czar David Sacks, to oversee rule development. The initiative seeks to define digital asset classifications, distinguishing between securities, commodities, and collectibles.

A key focus of the order is stablecoin expansion, with the administration advocating for their broader adoption as a tool to support the U.S. dollar’s dominance.

Officials believe increased stablecoin use could drive demand for U.S. Treasuries, potentially easing national debt burdens and lowering long-term interest rates.

This contrasts with the previous administration’s approach, which critics argued relied on enforcement actions rather than clear regulatory guidance.

Sacks emphasized that businesses require transparent rules to ensure compliance, signaling a shift toward structured oversight.

Notably, the administration has positioned stablecoins as an alternative to central bank digital currencies (CBDCs). Officials argue that CBDCs could pose risks to financial privacy and personal freedom.

Instead, the focus remains on integrating stablecoins into the broader financial system while maintaining dollar strength in global markets.

Ultimately, by providing regulatory clarity, officials seek to prevent further migration of crypto businesses to offshore jurisdictions.

The Trump administration is also considering the establishment of a national Bitcoin reserve but has not yet committed to the initiative.

Crypto czar David Sacks stated that the proposal remains under evaluation, emphasizing the need for further study before making a decision.

Disclaimer

This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.

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