SEC Ends Controversial Crypto Custody Rule

The SEC’s repeal of SAB 121 makes compliance easier for banks and cryptocurrency startups.
Trump aims to encourage innovation and adoption in the crypto sector through his crypto-friendly policies.

The US Securities and Exchange Commission has pulled the plug on a controversial 2022 guidance that compelled financial institutions to classify customer-held digital asset exposures as liabilities amidst an avalanche of objections from banking and cryptocurrency interests, namely Staff Accounting Bulletin No. 121.

Hester Peirce, SEC Commissioner, and head of the agency’s crypto task force, was quoted celebrating the move “Bye, bye SAB 121! It’s not been fun.” Critics long blamed SAB 121 for excessively increasing compliance costs and discouraging institutions from offering services in crypto custody.

This step fits into President Donald Trump’s broader initiative of friendly crypto regulations to ease the pressures of regulations that businesses have faced in dealing with cryptocurrency and for the adoption of digital assets. In addition to these regulations, an executive order has been issued. A crypto advisory council has also been formed to create the policies.

Impact on Banking and Crypto Industries

Many see the repeal as a potential gateway for banks and crypto firms to enter the digital asset market without facing the obstacles created by SAB 121. The decision simplifies reporting by removing the need to list both the assets and liabilities of customer-held digital assets. This change promotes a more supportive environment for offering crypto custody services. It paves the way for greater integration of digital assets into traditional financial services.

The SEC also created a task force on crypto regulation in the future, which can be seen as an adaptation of its stance on digital assets in the United States.

The news was also brought to light that the PCAOB amendment was approved by the SEC for January 2025. It introduces registration procedures for accounting firms with no operating practices. Beginning in 2025, the practice will be enforced through their annual reports.

The SEC’s action will contribute to a broader effort to create an architecture with regulation. This regulation aims to promote innovation while maintaining necessary safeguards. It might also create opportunities for further cooperation between financial institutions and the crypto industry.

Source: https://www.livebitcoinnews.com/sec-ends-controversial-crypto-custody-rule/