SEC Revokes Divisive Rule That Kept Major Banks Away from Crypto

After persistent efforts by the cryptocurrency sector, the SEC has officially revoked an accounting directive that had previously required banks to show digital assets as liabilities on their financial statements.

The directive had been a significant obstacle for major Wall Street financial institutions considering crypto investments. The repeal aligns with a series of policy changes introduced under the Trump administration, aimed at making it easier for financial companies in the U.S. to engage with decentralized digital currencies.

The directive—SAB 121—was established in 2022 and placed stringent capital requirements on crypto assets. These regulations heightened both financial and compliance burdens associated with offering cryptocurrency custody services in banks. As a result, operational costs surged for financial entities, discouraging Wall Street firms from deeper involvement in the crypto space.

Last year, attempts to repeal SAB 121 gained traction in Congress and received backing from both major parties. However, former president Joe Biden vetoed the proposed measure, ensuring the rule remained in place and further limiting banks from broadening their cryptocurrency-related services. Consequently, financial institutions remained largely restricted to offering ETFs and crypto derivatives trading for wealth management customers.

The policy shift was applauded by Hester Peirce, the SEC Commissioner who has been nominated to head a new cryptocurrency task force within the commission. It is anticipated that the task force will seek to create a more organized and transparent regulatory framework for digital assets.

“Goodbye, SAB 121! It was not a pleasure,” Peirce shared in a post on X on Thursday evening, following the repeal.

The SEC formally announced the decision to repeal the directive through a public notice only a few days after the resignation of Gary Gensler, the former SEC Chair who had been a strong advocate for the directive. Gensler had previously justified the directive as a necessary safeguard to protect investors in the case of cryptocurrency firm failures.

David Solomon, the CEO of Goldman Sachs, discussed the matter during talks at the 2025 World Economic Forum (WEF) in Davos, Switzerland. Although he admitted that the bank had been unable to directly own Bitcoin due to legal restrictions, he said the corporation would reevaluate its position should the regulatory environment change.

In a similar vein, Bank of America and Morgan Stanley CEOs discussed how President Donald Trump’s support for cryptocurrencies would affect their plans for digital assets going forward and possibly lead to more offerings in the market.

The broader crypto industry, including firms like Bit Digital Inc. (NASDAQ: BTBT) will be pleased that desirable regulatory changes are already happening in the early days of the new administration in Washington, D.C.

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