SEC Commissioner Hester Peirce Bids Farewell to Controversial Crypto Accounting Guidance SAB 121

The U.S. Securities and Exchange Commission (SEC) has officially revoked the controversial Staff Accounting Bulletin (SAB) 121, just days after the resignation of former SEC Chair Gary Gensler. The rule had drawn widespread criticism for requiring banks that hold cryptocurrencies to record them as liabilities on their balance sheets.

In its new bulletin issued on January 23, the SEC stated that it “rescinds the interpretive guidance” provided by SAB 121. The Commission clarified that entities should now evaluate any liabilities related to safeguarding crypto assets under broader accounting standards.

“Entities should implement this change retroactively for annual periods starting after December 15, 2024,” the SEC announced in its bulletin. Additionally, Vanessa A. Countryman, Secretary of the SEC, confirmed that SAB 122 has officially replaced SAB 121 in the regulatory framework.

SEC Commissioner Hester Peirce, a vocal critic of the rule, expressed her satisfaction on X (formerly Twitter), writing: “Bye, bye SAB 121! It’s not been fun: SEC.”

Peirce had previously referred to SAB 121 as a “pernicious weed,” criticizing Gensler’s unilateral approach to regulating the crypto industry. At an event in April 2024, she stressed that rules with such broad implications “should be set by the whole Commission” and not solely by staff reporting to the chairman.

Industry and Political Reactions
The decision to revoke SAB 121 has been met with applause from both industry leaders and lawmakers. Wyoming Senator Cynthia Lummis labeled SAB 121 “disastrous for the banking industry” and claimed that it “only stunted American innovation and the advancement of digital assets.” She added, “I am thrilled to see it repealed and get the SEC back on track to fulfilling its intended mission.”

Circle CEO Jeremy Allaire also criticized SAB 121, calling the rule “punitive for banks and financial institutions” and for corporations holding crypto assets on their balance sheets. Speaking at the Davos World Economic Forum, Allaire predicted that the crypto executive order would focus on rescinding such restrictive accounting guidance. “I’m strongly in favor of repealing it, and I would hope that President Trump would take that action,” Allaire stated.

Biden’s Veto and the Path to Repeal
The battle over SAB 121 dates back to May 16, 2024, when the U.S. Senate voted to overturn the accounting bulletin. However, then-President Joe Biden vetoed the resolution, defending SAB 121 as a reflection of the “considered technical” judgment of SEC staff.

With Gensler’s resignation and new leadership at the SEC, the rule’s repeal signals a shift in regulatory tone towards crypto assets, potentially fostering a more favorable environment for banks and financial institutions involved in the digital assets space.

As SAB 122 replaces the controversial guidance, industry observers will be closely watching for further regulatory developments under the SEC’s new leadership.