SEC Rescinds Guidance on Safeguarding Crypto Assets

The SEC has issued Staff Accounting Bulletin (SAB) 122, which rescinds the crypto asset guidance in SAB 121. Under SAB 121, an entity was required to recognize a liability and corresponding asset for its obligation to safeguard crypto assets for customers. Upon applying the rescission, “an entity that has an obligation to safeguard crypto-assets for others should determine whether to recognize a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies in [ASC] 450-20, Loss Contingencies, or [IAS] 37, Provisions, Contingent Liabilities and Contingent Assets under U.S. generally accepted accounting principles and IFRS Accounting Standards, respectively.”

Full retrospective application of SAB 122 is required for annual periods beginning after December 15, 2024, but entities are permitted to elect to rescind SAB 121 in any interim or annual financial statement period included in filings with the SEC after the date of publication of SAB 122 in the Federal Register.