SEC Stance on Crypto Custody Services

The United States Securities and Exchange Commission has maintained its position on a rule that limits crypto custody services for regulated financial firms. SEC Chief Accountant Paul Munter reiterated the agency's stance on accounting for crypto assets in a recent address, emphasizing the importance of SEC Staff Accounting Bulletin No. 121 (SAB 121). According to Munter, entities should record a liability on their balance sheets to safeguard crypto-assets held for others, unless specific mitigating circumstances exist. The SEC's introduction of SAB 121 in March 2022 sparked controversy, as it restricted banks and financial institutions from custodying crypto assets for clients. Despite opposition, the SEC stands firm on the rule, with exceptions for certain entities like bank holding companies with bankruptcy protection. SEC Commissioner Hester Peirce has expressed concerns about the rule, while political efforts to overturn it have been unsuccessful. The debate over SAB 121 continues to shape the regulatory landscape for crypto custody services.