Rule blocking banks' custody of crypto is withdrawn

Zach Gibson/Bloomberg News

WASHINGTON — The Securities and Exchange Commission has rescinded Staff Accounting Bulletin 121, the guidance from the agency that undercut banks' ability to hold crypto in custody for clients. 

The move comes just days after former SEC Chairman Gary Gensler resigned from the agency. 

"Bye, bye SAB 121! It's not been fun," posted Hester Peirce, an SEC commissioner appointed by President Donald Trump in his first term and who is leading the agency's newly created crypto task force. 

Bankers applauded the decision. 

"Since the bulletin was issued in 2022, ABA has advocated extensively with the SEC, prudential regulators and members of Congress to eliminate this misguided policy," said American Bankers Association President and CEO Rob Nichols in a Friday statement. "Allowing banks to serve as custodians for digital assets ensures that consumers won't be left only with unsupervised, poorly regulated options to safeguard these assets going forward." 

Groups representing the largest banks also cheered the news. 

"This is a step in the right direction toward providing regulatory clarity for financial institutions serving customers engaging in the digital asset ecosystem," said Financial Services Forum President and CEO Kevin Fromer in a statement. "SAB 121 made it cost prohibitive for Forum members to provide consumers with the safest and most secure way to hold their digital assets." 

It was also positive news for the crypto industry. 

"Withdrawing SAB 121 marks the end of an era that never should have started in the first place — and that's cause for celebration for American consumers, innovators, and policymakers alike," said Nathan McCauley, CEO of crypto custodian Anchorage Digital, in a statement. "By removing barriers like SAB 121, the administration is sending a clear message: Bipartisan legislation and notice-and-comment rulemaking is the best path forward for achieving regulatory clarity in crypto." 

SAB 121 drew criticism from Republican lawmakers, and some Democrats as well, in Congress. Both the House and the Senate voted to overturn the accounting guidance — which required that companies, including banks, hold crypto assets for their clients on their balance sheets as a liability — via a Congressional Review Act resolution. 

Former President Joe Biden vetoed that resolution, and it failed to obtain the necessary votes to overturn that veto. 

The accounting bulletin threw a wrench not just in banks' plans to provide custody for crypto, but also the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and the Federal Reserve's plans to develop rules and their own guidance around crypto custody. 

The move to rescind SAB 121 was taken as the Trump administration pursues other efforts to bolster the crypto sector. 

Trump signed an executive order just days after being inaugurated that, among other things, mandates that banks provide services for crypto companies. That's in response to complaints from influential conservatives that crypto companies were unfairly targeted by Biden administration regulators as those regulators looked to tamp down on money laundering. 

The order would "protect and promote fair and open access to banking services for all law-abiding individual citizens and private-sector entities alike," the White House said Thursday.