SEC Chief Accountant Paul Munter announced this week that some companies are granted exemptions from SAB 121. SAB 121 is an accounting rule that requires crypto assets to be included on the balance sheet when they are held by banks. The rule has been criticized for making it more costly for financial institutions to store crypto assets.
Ways to Exemption
Munter detailed how banks and other businesses can be exempt from SAB 121. For example, a bank can get an exemption by working with a state regulator that guarantees assets will be returned to customers in the event of bankruptcy. Brokers can get an exemption by working directly with customers without having the cryptographic keys to the crypto assets. Blockchains can get an exemption through a distributed ledger that tracks digital assets.
Political Reactions
Senator Cynthia Lummis criticized the SEC’s plan to implement SAB 121 through individual meetings. Lummis argued that the SEC bypassed Congress in creating SAB 121, which violated the Congressional Review Act. A proposed resolution was created, but it was vetoed by President Biden on the grounds that it would endanger consumer and investor welfare.
Sectoral Reactions
TaxBit CEO Aaron Jacob criticized the SEC’s accounting guidance, saying SAB 121 has created confusion. Jacob said Munter’s exemption statements raise questions about why the rules exist. There are many in the industry who believe SAB 121 is confusing and inconsistent.
Galaxy research director Alex Thorn said the exemptions are an attempt by the SEC to backpedal on SAB 121 without completely abandoning it. Thorn said the SEC initially wanted to apply these rules only to crypto companies, but now thinks it has found a way to exempt traditional banks from them.
Crypto industry trade associations also expressed concern over Munter’s speech, with Patrick Kirby stressing that SAB 121 limits consumers’ options for safely storing their digital assets and disrupts banking practices. Taylor Barr also argued that SAB 121 is flawed and unsustainable.
The SAB 121 rule highlighted in the article makes it costly for financial institutions to hold crypto assets. The SEC’s exemptions to certain entities have increased the complexity and ambiguity of the rules. Industry players argue that SAB 121 should be revised or clarified. This situation highlights the need for long-term changes in the crypto industry.
Disclaimer: The information contained in this article does not contain investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
