SEC Officially Repeals SAB 121 Electronic Money Anti-Law

In a significant development for the cryptocurrency industry, the United States Securities and Exchange Commission (SEC) has announced that it will withdraw Accounting Bulletin No. 121 SAB 121 on January 23, 2025. This event marks a significant regulatory change, as the SEC has replaced this controversial bulletin with Accounting Bulletin No. 122 SAB 122. This decision is welcomed as a step forward in reducing the accounting complexity that cryptocurrency companies have faced since the introduction of SAB 121 in 2022. This cancellation directly changes how these entities report the related payable debts for the protection of the digital assets held by their users. What does SAB 122 mean for cryptocurrency companies? The cancellation of SAB 121 removes the requirement for cryptocurrency platforms to consider the obligation to safeguard user assets as a debt obligation, regardless of actual financial risk. This change allows companies to apply a more nuanced and context-specific approach to determining debt obligations under broader accounting standards. According to SAB 122, current cryptocurrency platforms must assess risk protection by using: FASB ASC 450-20 Subtopic : This standard governs how U.S.-based companies account for loss contingencies and contingent liabilities.IAS 37 : This standard applies to entities using (International Financial Reporting Standards (IFRS)) and addresses provisions, contingent liabilities, and contingent assets. Cryptocurrency firms must retrospectively apply these changes for annual reporting periods beginning after 15th December 2024. However, companies may elect to early adopt the amendments for interim or annual periods submitted after the issuance of SAB 122. Why does the SEC implement this change SEC clarified in its filings that Staff Accounting Bulletins (SAB) are not legally binding rules but provide guidance reflecting the activities that SEC departments follow. The removal of SAB 121 reflects industry feedback on the significant nature of SEC's directives and aims to align cryptocurrency accounting activities with current standards. Vanessa A. Countryman, SEC Secretary, has confirmed the replacement of SAB 121 with SAB 122 within the agency's management framework. Updates have also been made to the SEC Staff Accounting Bulletin to formalize the change. Continuous disclosure obligation While SAB 122 cancels the controversial protection responsibility request, cryptocurrency companies still have an obligation to disclose risks according to accounting and broader management rules, including: Regulation SK Item 101, 105, and 303: Companies must disclose detailed information about their business operations, risk factors, as well as management's discussion and analysis. FASB ASC Topic 275: This standard requires disclosure of information about risks and uncertainties affecting financial statements. SEC emphasizes that companies must provide enough information for investors to understand the financial and operational impacts of protecting digital assets. Meaning for the cryptocurrency industry The cancellation of SAB 121 and the introduction of SAB 122 provide much-needed relief for cryptocurrency companies. By linking regulatory oversight with broader accounting standards, the SEC has simplified compliance while maintaining transparency and accountability. This regulatory change is a step forward in promoting a more balanced approach to cryptocurrency regulations. It allows companies to focus on innovation and growth without being hindered by unnecessary, rigid accounting rules. At the same time, investors are assured of continuous transparency regarding risks and obligations associated with protecting digital assets. As the cryptocurrency industry develops, such changes demonstrate that the SEC is willing to adjust its regulatory framework to meet the needs of a dynamic sector. DYOR! (Write&Earn $BTC {spot})BTCUSDT(