According to Bloomberg Tax, the U.S. Securities and Exchange Commission (SEC) has reportedly accepted a proposal with exceptions for certain institutions affected by the controversial Staff Accounting Bulletin No. 121 (SAB 121).
The SEC has allowed some banks and brokers to avoid balance sheet reporting through new business practices that provide exceptions to crypto accounting compliance guidelines.
Under this arrangement, the financial institutions will not report customers’ crypto holdings as a liability on their balance sheets under the provisions of SAB 121. However, they must protect their customers’ assets in the event of bankruptcy or bankruptcy.
In addition, institutions should implement internal safeguards to address legal risks associated with the emerging industry.
Market observers noted that this move will expand custody options for US crypto holders and attract more traditional financial institutions to the crypto industry.
SAB 121
This development comes more than two years after the SEC introduced the controversial SAB 121 guidance, which was intended to bring greater transparency and improved risk management to the rapidly evolving crypto industry.
The regulation enforces the recognition of custody obligations as liabilities on the balance sheet and requires detailed disclosure of the nature and risks associated with them.
However, the implementation of SAB 121 has raised major concerns. Many industry stakeholders view the regulations as an overreach by the SEC. They argue that this imposes excessive burdens on companies and could hinder innovation.
Critics also note that the regulations do not adequately distinguish between cryptocurrencies on public ledgers and traditional assets on approved ledgers, complicating compliance efforts.
As a result, US lawmakers recently tried to overturn the advisory. However, their efforts were thwarted when President Joe Biden vetoed the resolution. A subsequent attempt to counter the president’s veto also failed, as lawmakers could not reach the required threshold.