Summary:
SEC revokes SAB 121, allowing banks to own bitcoin and other cryptocurrencies
The rule change is part of a broader pro-crypto initiative by the new Trump administration
Bipartisan support was crucial in the push to overturn the restrictive rule
SEC Commissioner Hester Peirce leads a new crypto task force following the decision
Wall Street banks are now considering expanding their crypto offerings
SEC's Bold Move for Crypto Adoption
The U.S. Securities and Exchange Commission (SEC) has made a significant change by revoking an unpopular accounting rule that previously hindered Wall Street banks from engaging with bitcoin and other cryptocurrencies. This decision comes after sustained pressure from the crypto industry and reflects a broader shift towards pro-crypto regulations under the new Trump administration.
Image Source: Avishek Das | Lightrocket | Getty Images
What Was SAB 121?
The rule, known as Staff Accounting Bulletin 121 (SAB 121), was introduced in 2022 and classified digital assets as liabilities on bank balance sheets. This classification imposed strict capital requirements, which raised operational costs and deterred financial institutions from offering crypto custody services. As a result, banks were largely limited to derivatives trading and offering ETFs to wealth management clients.
Bipartisan Support for Change
Efforts to overturn this rule gained bipartisan support in Congress last year; however, former President Joe Biden vetoed the proposed legislation, leaving the rule intact and further discouraging banks from adopting digital assets.
A New Direction for the SEC
With the recent announcement, SEC Commissioner Hester Peirce, who has been appointed to lead a new crypto task force, expressed her enthusiasm on social media: "Bye, bye SAB 121! It’s not been fun.” The SEC's decision was made public shortly after the departure of Gary Gensler, a former chair who had supported the rule as a protective measure for investors amid concerns over crypto firm bankruptcies.
Wall Street's Response
At the recent World Economic Forum in Davos, banking leaders like Goldman Sachs CEO David Solomon indicated that the regulatory landscape could lead them to reconsider their stance on owning bitcoin. The CEOs of Morgan Stanley and Bank of America also acknowledged how Trump’s pro-crypto tone could reshape their strategies regarding digital assets.
This pivotal change marks a new chapter for the crypto market, potentially paving the way for greater institutional involvement in digital currencies.
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