Why SAB 121’s end is a big deal

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

---

SEC Commissioner Hester Peirce — two days after being named leader of a new crypto task force — revealed SAB 121 would be no more.

Loading Tweet..

Some context: A Staff Accounting Bulletin, or SAB, represents interpretations and policies followed by SEC divisions in administering federal securities laws-related disclosure requirements.

The SEC published SAB 121 in March 2022. It notably said that an entity “should present a liability on its balance sheet to reflect its obligation to safeguard the crypto-assets held for its platform users.”

Why does the crypto industry care so much about the agency rescinding this? 

Cantor Fitzgerald Howard Lutnick explained the issue pretty well in a video he posted to X in September — a couple months before Trump nominated him to lead the Commerce department.

There’s a misunderstanding that TradFi players don’t want to transact in bitcoin, Lutnick claimed. He added that for banks to custody a client’s bitcoin, “they would have to set aside their own money equal to that amount in sort of like a jail.”

Indeed, financial organizations told SEC Chair Gary Gensler that the bulletin “has curbed the ability of the associations’ members to develop and bring to market at scale certain digital asset products and services.”

The upshot? As VanEck research execs wrote in a December post detailing 2025 crypto predictions, this repeal “will pave the way for banks and brokers to custody spot crypto, further integrating digital assets into traditional financial infrastructure.”

Benchmark analyst Mark Palmer argued in a Friday note that this SAB 121 rescission “represents an even more meaningful game-changer for bitcoin and the broader crypto ecosystem” than a potential strategic bitcoin reserve does.

While SAB 121 was published in 2022, it wasn’t until last year that Congress sent a bill overturning the guidance to Joe Biden’s desk. He vetoed it.

Ava Labs deputy general counsel Wee Ming Choon told me last month that rescinding SAB 121 would be an act of “good will” that a new agency administration could take quickly. It seems that take was correct. 

Rest up this weekend, as another wave of developments is sure to come.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: Unpacking crypto and the markets.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.