“Bye, bye SAB 121! It’s not been fun,” says a post published in X by SEC Commissioner Hester Pierce after the US regulator withdrew the controversial accounting guidance of 2022, which required companies to report customers’ crypto assets on their balance sheets.
The cryptocurrency industry has welcomed the move wholeheartedly. Many crypto enthusiasts have expressed their happiness openly on social media. Some think that it is a crucial point in the journey of the crypto sector toward success. Time to dive deeper. Ready?
What Was SAB 121 and Why Was It Controversial?
SAB 121 was introduced in 2022. It aimed to address risks related to customers’ crypto assets. It allowed investors to stay informed about potential risks like theft or misuse of crypto assets, as it required companies to list customer’s crypto holdings on their balance sheets. However, it caused inflated balance sheets and significant operational challenges for companies.
How Did the Rule Affect Banks and Crypto Firms?
Banks faced strict capital reserve requirements due to boosted balance sheets. Naturally, it limited the ability of banks to offer crypto custody services. Meanwhile, expanded balance sheets created severe operational challenges for crypto companies like Coinbase and Robinhood.
In the year 2024, the US congress made a strong attempt to cancel the SAB 121 rule. The members of the lawmaking hours voted against the rule, demanding its withdrawal. However, using veto power, then-US President Joe Biden overturned the decision of the lawmaking body.
What does the SEC Commissioner Think About The SEC’s Repel of SAB 121?
Hester Peirce, who was recently appointed to lead a crypto task force aimed at creating a clear crypto regulation framework in the United States, has expressed happiness in the SEC’s decision to repeal the controversial guideline of SAB 121.
In conclusion, the repeal of SAB 121 marks a significant step forward for the cryptocurrency sector. By reducing regulatory burdens on companies and banks, the SEC has created a pathway for better industry growth. As Hester Peierce leads the way toward clearer crypto regulations, the industry looks set to thrive under a more balanced and practical regulatory framework.
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