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US SEC Rescinds SAB 121 Order, Now Allows Banks Bitcoin Custody

Trump's administration has signaled a more favorable stance towards cryptocurrency regulation, a change highlighted by the appointment of Mark Uyeda as interim SEC chair.

The US SEC rescinds the SAB 121 order via SAB 122. The Securities and Exchange Commission’s (SEC) recent repeal of Staff Accounting Bulletin (SAB) 121 marks a significant turning point for the cryptocurrency industry, particularly concerning Bitcoin custody services offered by banks.

Years of pressure preceded the repeal, which brought widespread relief. This included a joint Congressional expression of opposition (vetoed by then-President Biden) and consistent criticism from industry leaders.

Notably, the current Republican administration has signaled a more favorable stance towards cryptocurrency regulation, a change highlighted by the appointment of Mark Uyeda as interim SEC chair. Uyeda previously criticized the previous administration’s approach to crypto regulation as disastrous.

SEC Previous Stance on Bank Bitcoin Custody

SAB 121, introduced in March 2022, mandated that financial firms holding cryptocurrency on behalf of clients report these assets as liabilities on their balance sheets.

However, the rule faced considerable opposition from the crypto community, which argued its cumbersome reporting requirements hindered the efficient and secure custody of digital assets.

The impact of SAB 121’s revocation is potentially profound. By enabling regulated banks and financial institutions to offer Bitcoin custody services, the ruling enhances accessibility for millions of customers.

Notably, this shift provides several advantages: improved security and trust for users unfamiliar with self-custody; increased adoption due to the ease of interaction with crypto through established institutions; and mitigation of the risk associated with lost private keys.

Furthermore, it promises greater financial inclusion, benefiting individuals lacking the technical expertise or resources to manage their secure digital wallets.

Banks Bitcoin Custody is Hypocrisy?

The reception within the Bitcoin community has been mixed. Commentary from Jacob, CEO of WhaleWire, highlights a certain irony: the focus on banks holding Bitcoin despite SAB 121’s non-specific mention of Bitcoin.

He argues that this development contradicts Satoshi Nakamoto’s original vision of a decentralized system free from third-party control. This perspective magnifies an ongoing debate about the balance between accessibility and the core principles of decentralization within the Bitcoin ecosystem.

An X user commented that while the long-term effects of this regulatory shift remain unknown, the rescission of SAB 121 undeniably marks a significant step in shaping the future of Bitcoin custody and its mainstream financial integration.

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