
Securities and Exchange Commission Crypto Asset Developments
On January 21, 2025, the Securities and Exchange Commission’s Acting Chairman Mark T. Uyeda announced the launch of a crypto task force (the Task Force) to develop a “comprehensive and clear regulatory framework” for crypto assets. The Task Force will be led by Commissioner Hester Pierce, and assisted by Richard Gabbert, Senior Advisor to the Acting Chairman, and Taylor Asher, Senior Policy Advisor to the Acting Chairman, who will serve as the Task Force’s Chief of Staff and Chief Policy Advisor, respectively. The Task Force will be staffed by current employees across the agency and will collaborate with the Commission’s staff as well as with the public.
The core purpose of the Task Force is to develop a sound regulatory framework that would support innovation while ensuring investor safeguards. This is significant because, to date, the Securities and Exchange Commission’s regulation of cryptocurrencies, generally, has been through its enforcement actions and ad hoc interpretations of the law, which has led to confusion, setbacks in advancement and overall negativity in the integrity of the underlying technology and its value. The Task Force’s main purpose is to develop clear and transparent rulemaking that would assist with registration and disclosure requirements for crypto assets as well as promote a friendly environment to support innovation and technological advancements. The use of enforcement actions will be carefully reviewed.
The Task Force will work closely with Congress and operate within the statutory framework provided by Congress. To that end, it will coordinate with other federal departments and agencies, including the Commodity Futures Trading Commission (CFTC), as well as state and international counterparts.
Additionally, on January 23, 2025, the SEC rescinded Staff Accounting Bulletin No. 121 (SAB No. 121), addressing accounting requirements for cryptocurrency companies or those holding crypto assets.
The SEC issued SAB 121 in March 2021, providing guidance on how public companies should account for crypto assets held by them in custodial arrangements (for example, when exchanges like Coinbase or Binance hold cryptocurrencies on behalf of customers).
The guidance aimed to provide accounting for crypto custodianship and disclosure requirements, outside general accounting standards (ergo, Generally Accepted Accounting Principles).
The SEC’s rationale to rescind or withdraw SAB 121 indicates a significant shift in its stance on the accounting treatment of crypto assets held by custodians. The Trump Administration’s bullish policy on crypto assets with the onboarding of a SEC Task Force signals changing views on crypto and custody, as well as a broader industry impact.
With the rescinding of SAB 121, companies that previously followed its guidelines will likely need to revisit their financial statements and disclosures related to digital assets held for its customers. While there is no immediate new guidance for companies, the SEC has suggested that it will work closely with the Financial Accounting Standards Board (FASB) and other regulatory bodies to develop a consistent framework for crypto assets.
For crypto exchanges and custodians that deal with client funds, the rescindment of SAB 121 means they will have to consider how to account for crypto assets in their balance sheets without the previous staff guidance. This could include: (i) changes in reporting, (ii) more risk disclosures, and (iii) potential impact on valuations.
The SEC’s decision to rescind SAB 121 reflects its evolving approach to the accounting treatment of crypto assets, signaling that the regulatory environment is still developing. While crypto companies must now navigate a period of uncertainty regarding how to account for customer-held crypto assets, this change may eventually lead to clearer and more standardized accounting practices.
The SEC's action is part of a larger trend of increased regulation and oversight in the cryptocurrency space, as regulators continue to grapple with how to balance innovation with investor protection and financial stability.