While crypto advocates cheer the SEC’s decision, skeptics like Jacob King warn that the industry’s shift toward bank custody contradicts Bitcoin’s original vision of decentralization.
In a significant policy reversal, the United States Securities and Exchange Commission (SEC) has rescinded Staff Accounting Bulletin No. 121 (SAB 121), a controversial accounting guideline that mandated companies holding digital assets for clients to record these holdings as liabilities on their balance sheets.
The revocation came shortly after President Donald Trump’s inauguration, signaling a shift in the regulatory approach toward the emerging economy.
Background and Industry Reaction
Enacted during President Joe Biden’s administration in March 2022, SAB 121 aimed to enhance transparency and risk management in the burgeoning crypto sector. However, industry stakeholders criticized the rule for imposing burdensome reporting requirements, complicating the custody of digital assets, and increasing compliance costs.
The banking sector also expressed concerns, noting that the rule hindered their ability to serve as secure custodians for digital assets.
The recent revocation has been met with approval from crypto advocates. SEC Commissioner Hester Peirce, known for her pro-crypto stance, celebrated the decision by posting on X (formerly Twitter):
“Bye, bye SAB 121! It’s not been fun.”
Criticism from Outside the Crypto Industry
Despite the positive reception within the crypto community, the repeal has faced criticism from some financial analysts. Jacob King, CEO of WhaleWire, claims the crypto advocates are wrong for believing the revocation would allow banks to custody Bitcoin BTC for customers.
Bitcoiners are now rallying behind the fact that SEC just rescinded SAB 121, claiming it means banks can now custody Bitcoin for clients.
Not only is this such a stretch and makes zero mention of Bitcoin, but do you see the hypocrisy in all of this?
Satoshi's entire point… pic.twitter.com/8jXzmJBIdi
— Jacob King (@JacobKinge) January 23, 2025
In response, Carl Horton countered the tweet, noting that many still want loans using their BTC BTC $110 010 24h volatility: 0.3% Market cap: $2.19 T Vol. 24h: $34.13 B as collateral:
“Some people, like children and the elderly, need custodians. Others want smooth inheritance transfers and others want loans using their BTC in custody as collateral. BTC is freedom money and you can interact with it any way you want.”
Previous SEC Actions Against the Crypto Industry
Meanwhile, under the leadership of former SEC Chair Gary Gensler during the Biden administration, the SEC adopted a stringent regulatory stance toward the cryptocurrency sector.
The agency initiated numerous enforcement actions against crypto companies, alleging violations such as fraud and unregistered securities offerings. While these measures were intended to protect investors and maintain market integrity, critics argued that the aggressive approach stifled innovation and created an uncertain regulatory environment.
A report by Cornerstone Research highlighted that the SEC’s crypto-related enforcement actions declined by 30% in Gensler’s final year, with 33 actions initiated compared to 47 the previous year. Despite the decrease, monetary penalties reached a record high, underscoring the agency’s continued focus on regulating the crypto industry.
The recent policy changes, including the revocation of SAB 121 and the establishment of a crypto task force under the new administration, suggest a potential shift toward a more balanced regulatory framework that fosters innovation while ensuring investor protection.
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