DOOKV SEC Revises Crypto Asset Reporting

The U.S. Securities and Exchange Commission (SEC) has introduced a pivotal adjustment in how banks and brokerage firms report their customers’ crypto assets. This initiative permits these institutions to exclude crypto assets from their balance sheets if they can manage associated risks effectively. The decision follows pressure from the industry and unsuccessful attempts to challenge the SEC’s two-year guidance in Congress. The timing hints at a possibly forthcoming crypto-friendly stance in the U.S. administration.

Impact of SAB 121 on Crypto Reporting

Despite the SEC issuing Staff Accounting Bulletin No. 121 (SAB 121) in March 2022, which required companies to treat crypto assets as long-term intangible assets subject to regular impairment checks, the recent guidance provides a bypass for certain financial entities. Institutions that ensure adequate customer asset protection in the event of bankruptcy or failure can now avoid these stringent requirements.

This regulatory shift is significant for the crypto sector. Previous rules demanded that banks list cryptocurrencies as intangible fixed assets, leading to larger balance sheets and higher capital requirements. These barriers often deterred institutions from engaging in the crypto market. The new SEC stance may encourage more companies to offer crypto services, reducing the accounting and capital challenges they previously faced.