US lawmakers propose legislation to outlaw SEC's controversial rule crippling the viability of crypto custody businesses.

US lawmakers have introduced new legislation that would effectively nullify a controversial US Securities and Exchange Commission accounting bulletin widely seen in the crypto industry as making regulated digital asset custody economically unworkable for banks and broker-dealers. The measure targets SEC Staff Accounting Bulletin 121 (SAB 121), which requires public companies safeguarding crypto assets for customers to record those assets as liabilities on their balance sheets, backed by corresponding assets. Critics argue this treatment is unlike that applied to traditional assets held in custody and forces firms to hold substantial additional regulatory capital, deterring banks from offering crypto custody services. The proposed bill reflects growing bipartisan frustration in Congress with the SEC’s approach to digital assets and its use of staff guidance rather than formal rulemaking for major policy shifts. Lawmakers backing the legislation contend that SAB 121 exceeds the SEC’s statutory authority, undermines the development of compliant crypto market infrastructure, and should be rescinded or barred from enforcement. For the crypto sector, overturning SAB 121 would be significant for the viability of large, regulated custodians—especially banks—entering or expanding in digital asset custody, a key component for institutional adoption and for the safety and segregation of client assets.

✨ AI-generated background, compiled from web sources — not editorial content.

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