The U.S. Securities and Exchange Commission (SEC) has made a significant policy shift by rescinding the contentious Staff Accounting Bulletin (SAB) 121, a rule that placed stringent accounting requirements on banks and public firms holding cryptocurrencies. This decision comes just days after the departure of former SEC Chair Gary Gensler and signals a potential shift in the regulatory approach under the leadership of Commissioner Hester Peirce and the newly established crypto task force.

The SEC formally withdrew SAB 121 on January 23, replacing it with updated guidance through SAB 122. Initially introduced in March 2022, SAB 121 mandated financial firms to record customer-held crypto assets as liabilities on their balance sheets. Critics argued that this requirement effectively discouraged banks from entering the crypto market, stifling innovation and industry growth.

The revised framework under SAB 122 now allows companies to apply broader accounting standards, such as U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Commissioner Hester Peirce, a long-standing critic of SAB 121, celebrated the move. In a post on X, she wrote, “Bye, bye SAB 121! It’s not been fun.” She had previously argued that the rule failed to address how securities laws applied to emerging cryptocurrencies and questioned whether an accounting bulletin was the right tool to regulate such a dynamic sector.

The reversal follows years of contention surrounding SAB 121. In 2024, a bipartisan coalition in Congress passed a resolution to overturn the rule, but the effort was vetoed by then-President Joe Biden. The recent repeal of SAB 121 under the new administration reflects a shift in political priorities and regulatory philosophy.

Senator Cynthia Lummis was among those who applauded the SEC’s decision, describing SAB 121 as a “disaster for the banking industry” that hindered the United States’ ability to innovate in the digital asset space. “I am thrilled to see it repealed and get the SEC back on track to fulfilling its intended mission,” she remarked.

This policy change also aligns with the broader pro-crypto stance of President Donald Trump, who was inaugurated on January 20. Shortly after taking office, Trump issued his first executive order related to cryptocurrency, establishing a Presidential Working Group to promote regulatory clarity and explore the possibility of creating a national crypto reserve. The order also explicitly prohibits the development of a central bank digital currency (CBDC), commonly referred to as a “digital dollar.”

The repeal of SAB 121 marks a critical moment for the SEC and the U.S. crypto industry. Under Gensler, the agency took an aggressive enforcement approach, demanding companies register as securities issuers and launching lawsuits against non-compliant firms. Now, under interim Chairman Mark Uyeda and Commissioner Peirce’s guidance, the SEC appears poised to embrace a more collaborative regulatory framework.

This decision may signal a new era of crypto regulation, one that seeks to balance investor protection with fostering innovation in the rapidly evolving digital asset space. By removing restrictive policies like SAB 121, the U.S. has taken a step toward reestablishing its position as a global leader in cryptocurrency and blockchain development.