SEC revokes unpopular banking rule that blocked Wall Street banks from adopting crypto

After years of lobbying by the crypto industry, the U.S. Securities and Exchange Commission has rescinded an accounting rule that forced banks to treat bitcoin and other tokens as a liability on their balance sheets.

The guidance was a major deterrent to Wall Street banks owning bitcoin — and was the latest in a string of actions taken by the new Trump administration to make it easier for U.S. companies and financial firms to deal in virtual, decentralized currencies.

The guidance, known as Staff Accounting Bulletin 121, or SAB 121, was introduced in 2022 and subjected digital assets to strict capital requirements. The measure, which significantly raised the financial and regulatory risks of offering crypto custody services, boosted operational costs for financial institutions and ultimately discouraged broader participation by Wall Street in crypto markets.

Efforts to overturn SAB 121 gained bipartisan support in Congress last year. But then-President Joe Biden vetoed the proposed legislation, leaving the rule intact and further discouraging banks from adopting digital assets. Banks have been largely forbidden from expanding their crypto offerings beyond derivatives trading and offering ETFs to wealth management clients.

SEC Commissioner Hester Peirce, who on Tuesday was tapped to lead a new “crypto task force” within the agency aimed at “developing a comprehensive and clear regulatory framework for crypto assets,” praised the announcement.

“Bye, bye SAB 121! It’s not been fun,” she wrote in a post on X late Thursday night following the decision.

The SEC’s decision to revoke the rule was announced in a public notice, just days after Gary Gensler, a former SEC Chair and vocal supporter of the measure, stepped down from his role. Gensler had defended the rule as necessary to protect investors in the event of crypto firm bankruptcies.

This week in Davos, Switzerland, Goldman Sachs CEO David Solomon told CNBC that from a regulatory perspective, the bank couldn’t own bitcoin and that it would revisit the issue if the rules changed. The CEOs of Morgan Stanley and Bank of America also weighed in from the World Economic Forum on how President Donald Trump’s pro-crypto tone could reshape their plans and potentially lead to expanded digital offerings.

— CNBC’s Jeff Cox contributed to this report.