March 6 Critical: What Does the Removal of SAB 121 Mean for the US Cryptocurrency Market?

SAB 121 was canceled in its first week, removing the barrier between banks and crypto. On March 6, the Fed, FDIC, and OCC will hold a regulatory meeting. The crackdown on cryptocurrencies has been reversing under Trump. Under the Biden administration, the SEC and other institutions have taken a more negative stance against cryptocurrencies, finding support from the central government. This has led to many negative crypto news from the US over the years. However, with recent developments, this situation is starting to change.

The SEC, under the leadership of Gary Gensler, has frequently taken steps to undermine the cryptocurrency ecosystem. SAB 121 was one of the most criticized moves by the SEC. SAB 121 was rescinded by Hester Peirce shortly after Trump took office. At first, traditional accountants stated that SAB 121 created an entirely new accounting standard for digital assets and that this was a move beyond the SEC’s authority. Jim Kroeker, the SEC’s former chief accountant and former vice chairman of the Financial Accounting Standards Board, stated that SAB 121 was inconsistent with GAAP (Generally Accepted Accounting Principles) standards and created a new, unique accounting model for crypto custody arrangements.

GAAP is the accounting rules set by the FASB that all US public companies must follow. Banks and financial institutions follow these rules in their financial reporting, ensuring consistency and transparency. The SEC had created a separate accounting standard for cryptocurrencies, preventing financial institutions from doing business with crypto. However, with the removal of SAB 121, companies will no longer be penalized for providing crypto custody services. This change will allow large banks to provide crypto services. For example, JPMorgan, which used to resist opening bank accounts with crypto companies, will now be able to institutionally store both its own and its customers’ cryptocurrencies.

Of course, institutions such as the Fed, FDIC and OCC need to encourage banks in this regard. On March 6, these three institutions will hold a meeting to review regulations. Important developments are expected to occur at this meeting regarding the steps to be taken regarding cryptocurrencies.