On January 23, 2025, the SEC issued Staff Accounting Bulletin (SAB) No. 122 to rescind SAB 121, which had previously required entities to recognize liabilities and corresponding assets for the safeguarding of crypto assets. SAB 121, introduced in March 2022, caused significant changes to financial reporting by requiring the fair value of safeguarded crypto assets to be recorded. This change applied even if the entity did not have control over the assets.
SAB 121 also mandated detailed disclosures regarding the safeguarding of crypto assets, such as who controls the assets and protects them from theft. However, it did not define “safeguarding,” leading to considerable judgment calls by entities in determining if the guidance applied.
With SAB 121 rescinded, entities are no longer required to recognize these obligations on their balance sheets, which will impact the financial statements of companies affected. The retrospective application of SAB 122 will apply for annual periods starting after December 15, 2024, though early adoption is allowed for filings after January 30, 2025.
This shift will help reduce regulatory and accounting challenges, particularly for regulated entities, while also clarifying the treatment of crypto assets in financial reporting.