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On January 23, 2025, President Donald Trump began offering his commitment to transform the digital asset industry by supporting policies, rules and regulations regarding responsible growth and use of all sectors of the economy to ensure America’s position as digital assets, blockchain technology, and the world leader. These include:
President Donald Trump issued an executive order to strengthen America’s leadership in digital financial technology and established a working group on digital assets markets chaired by White House AI and Crypto Czar David Sacks, who shared his views here. The Securities and Exchange Commission has revoked SAB 121 Accounting Rules that prevented financial institutions from detaining their clients’ digital assets.
About SAB 121
Staff Accounting News 121 was published by SEC Staff on March 31, 2022. It was issued in response to an increase in the number of entities offering digital asset management services.
The rules required entities to recognize their liability at fair market value (FMV) and their corresponding assets for their obligation to protect their clients’ digital assets. This balance sheet disclosure requirement, which was detained because it did not apply to traditional assets such as securities, poses challenges for banks subject to regulatory reserve requirements. The rules could significantly increase the financial burden on these financial institutions that want to provide digital asset custody services and prevent them from entering the market.
The regulations also required that they provide a considerable number of detailed disclosures on the footnotes of financial statements and footnotes outside the financial statements, the nature and quantity of digital assets protected, and the risks associated with the concentration of digital asset protection. Such disclosures included information about who held the encryption key, who was obliged to maintain internal recordkeeping, protect digital assets, and protect against loss or theft.
Furthermore, the rules were not easily used because they did not define protection. In many cases, entities often had to use important judgments to determine whether a transaction was within the scope of a rule.
For these reasons, traditional financial institutions did not support SAB 121. It essentially created an important barrier to providing digital asset management services and hampered the innovation in tokenization.
William Quigley is a cryptocurrency and blockchain investor and began his career as a bank auditor before co-founding Wax.io Blockchain and Stablecoin Tether (USDT) and explained to me.
“SAB 121 placed a major restraint on the ability of banks to maintain the storage of cryptocurrency assets on behalf of their clients by requiring banks to reflect both their assets and liability in the FMV. With the withdrawal of SAB 121, the bank can represent it.”
About SAB 122
Staff Accounting Breaking News 122 offers greater flexibility than banks and traditional financial institutions. This is a digital asset property service that will return to pre-SAB accounting principles and standards. 121 was imposed. The preliminary guidance provided by the Office of the Money Secretary around 2020 seemed thoughtful.
SEC staff emphasize that entities should continue to provide clear and thorough disclosures of the risks, obligations and uncertainties associated with protecting digital assets. “FDIC looks forward to working with the President’s working group on the digital asset market,” said Acting Chair of Travis Hill, who released 175 documents relating to the oversight of banks engaged or attempted to engage in digital asset-related activities.
Therefore, SAB 122, which applies to the annual period beginning on or after December 15, 2024, does not constitute an entire exemption from the previous interim or annual financial statement period and from recognizing the reporting company’s liability related to the entity’s digital asset management activities.
Conclusion
The digital asset market working group includes Mark T. Weda, the representative SEC who launched a task force led by Republican commissioner Hester Peirce, who developed a “comprehensive and clear regulatory framework for digital assets.” The goal of this task force is to regulate “less enforcement” regulations through established regulatory guidelines, the path to registration, and disclosure requirements that continue to drive institutional participation in tokenization and broader market growth.
These tokenization-friendly initiatives, including by the SEC Task Force, are welcomed by the Bank of New York (BNY), the world’s largest custodian bank. This demonstrates the intention to expand custody services to digital assets, the American Association of Bankers, and “Etherealize.io.” CEO of Etherealize.io.
