#SEC $SEC SEC sets up exemption channel for banks and securities firms to circumvent cryptocurrency accounting policy SAB 121
The latest move by the U.S. SEC has opened an exemption for financial institutions, allowing them to avoid disclosing customer cryptocurrencies in their financial reports. This move is intended to ease the pressure on financial institutions to comply with the controversial SAB 121 policy, which originally required banks to include customer crypto assets in their balance sheets, triggering capital pressure and congressional questions.
According to internal information from the SEC, based on past guidance, financial institutions can be exempted from balance sheet disclosure under certain arrangements, but they must effectively hedge related risks. Since 2023, many large banks have negotiated with the SEC and successfully obtained exemptions, protecting customer assets while avoiding unnecessary regulatory capital requirements.
The move may herald a shift in the SEC’s accounting stance, which is expected to broaden the range of service options for cryptocurrency investors in the U.S. Banks have pointed out that the original accounting treatment limited the provision of crypto services because the expansion of balance sheets triggered stricter regulatory capital thresholds.
Background review: The SAB 121 policy was challenged by Congress. Although the Biden administration strongly supported it, the majority vote in the House of Representatives did not meet the standard for overturning it. The Republicans continue to push for the revocation of the policy, believing that it is a means for the SEC to suppress digital assets. The blockchain industry also expressed dissatisfaction with this, and the Government Accountability Office also pointed out that the SEC lacked a formal rule basis when handling the policy. Industry leaders are actively lobbying and calling on the Biden administration to adjust its position.
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