Explained: SEC’s SAB 122 and What It Means for Crypto Custody
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Key notes
- The SEC’s SAB 122 removes previous restrictions, allowing banks to custody crypto assets without listing them as balance sheet liabilities.
- This change simplifies compliance, reduces costs, and opens the door for broader adoption of crypto services by traditional financial institutions.
- The update reflects a broader U.S. shift toward pro-crypto policies, aligning with initiatives like the proposed national Bitcoin reserve and digital asset stockpile

The U.S. Securities and Exchange Commission (SEC) recently announced a major policy change that could reshape the way banks handle cryptocurrency. With the introduction of Staff Accounting Bulletin No. 122 (SAB 122), the SEC has removed significant barriers for banks looking to custody digital assets like Bitcoin. Here’s what you need to know about this policy shift and its implications.
What Is SAB 122?
SAB 122 is a new guideline from the SEC that effectively repeals SAB 121, a rule that previously made it difficult for banks to offer crypto custody services.
Under SAB 121, financial institutions holding crypto for customers had to record those assets on their balance sheets as both liabilities and assets. This requirement made compliance expensive and complicated, as it increased capital requirements and risk reporting obligations. Many banks avoided entering the crypto custody market entirely because of these rules.
SAB 122 changes the game. Now, instead of treating crypto custody risks as balance sheet liabilities, banks can evaluate them under contingent liability standards like those outlined in FASB Loss Contingencies (ASC 450-20). This means risks like fraud or theft will no longer weigh down balance sheets, simplifying compliance and reducing financial burdens.
What Does This Mean for Banks?
The new rules make it much easier and less risky for banks to custody crypto assets on behalf of customers.
- Lower Compliance Costs: Banks won’t need to maintain large amounts of capital to cover perceived risks.
- Simplified Accounting: Custodial risks like theft will now be treated as contingent liabilities, streamlining reporting processes.
- Broader Adoption: With the barriers reduced, more financial institutions are likely to offer secure crypto custody services, attracting retail and institutional investors alike.
Why Is This Important for Crypto?
This move is a big step forward for the integration of cryptocurrencies into the traditional financial system.
For years, banks have been cautious about entering the crypto space due to unclear or burdensome regulations. SAB 122 eliminates one of the largest hurdles, signaling a more open regulatory approach. By allowing banks to safely hold digital assets, the SEC is helping legitimize crypto as a mainstream financial tool.
Who’s Supporting the Change?
SEC Commissioner Hester Peirce, a well-known advocate for crypto, celebrated the repeal of SAB 121, tweeting, “Bye, bye SAB 121! It’s not been fun.” Others in the industry, like ETF analyst James Seyffart and crypto leaders such as Michael Saylor, have also praised the move as a win for the industry.
The change reflects a broader pro-crypto shift in U.S. policy, aligning with recent developments like the proposed national Bitcoin reserve and the creation of a digital asset stockpile under President Trump’s executive order.
The Bottom Line
SAB 122 makes it easier for banks to custody cryptocurrencies, paving the way for greater adoption and integration into traditional finance. While challenges like regulatory uncertainty and market volatility remain, this change marks a significant step toward making crypto a fully legitimate part of the U.S. financial system.
Banks can now play a bigger role in safeguarding digital assets, opening up new opportunities for both institutions and investors. This is a clear signal: the U.S. is moving closer to embracing crypto on a larger scale.
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