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Under the Biden administration, the SEC and other regulatory bodies have advanced a negative stance towards cryptocurrencies, supported by centralized governance. This has led to numerous adverse news reports concerning cryptocurrencies from the US over the years. However, the current situation indicates a notable reversal.
SAB 121 and Its Impacts
Led by Gensler, the SEC has taken specific steps to undermine cryptocurrency operations. One of the most troubling moves has been the introduction of SAB 121. This controversial accounting guideline, known as the SEC’s Staff Accounting Bulletin 121, was announced by Hester in the first week of Trump’s presidency and has since been rescinded.
When this rule was first introduced, traditional accountants were taken aback by SAB 121, with a prominent figure stating that it created an entirely new accounting standard for digital assets, which was beyond the SEC’s authority. Jim Kroeker, the former vice president of the Financial Accounting Standards Board and chief accountant at the SEC, commented: “The SEC staff previously attempted to claim that SAB 121 was consistent with the existing GAAP standards, which is not accurate. This created a new and unique accounting model for crypto custody regulations without going through the necessary process for GAAP formulation.”
Generally Accepted Accounting Principles (GAAP) are standardized accounting rules set by the FASB that all public companies in the US must follow. They are crucial for ensuring consistency and transparency in the financial reporting of banks and other financial institutions.
What Has Changed?
Following the repeal of SAB 121, an SEC spokesperson indicated that companies providing crypto custody services would no longer be penalized. Major banks can now offer services related to cryptocurrencies. For instance, JPM previously resisted opening bank accounts for crypto companies but can now store its clients’ or its own cryptocurrencies corporately.
Of course, institutions like the Fed, FDIC, and OCC also need to encourage banks in this regard. On March 6, these three institutions will meet to review regulations, potentially unveiling further steps related to cryptocurrencies.
