accounting

SAB 121

SEC Staff Accounting Bulletin 121, a directive that required entities custodying crypto assets to record them as both an asset and a liability on their balance sheets.

SAB 121 in cryptocurrency accounting

SAB 121 (Staff Accounting Bulletin No. 121) was SEC staff guidance issued in March 2022 that changed how entities safeguarding crypto assets for users presented those obligations on the balance sheet. Its requirements, and later rescission through SAB 122, materially affected institutional custody accounting.

What is SAB 121?

SAB 121 was guidance from the SEC's Office of the Chief Accountant that addressed the accounting treatment for obligations to safeguard crypto assets held for others. Before SAB 121, companies that custodied cryptocurrency for clients typically disclosed these holdings in notes to their financial statements, consistent with how traditional custodians treat client assets.

SAB 121 changed this by requiring entities to:

  1. Recognize a liability on their balance sheet equal to the fair value of custodied crypto assets, reflecting their obligation to safeguard those assets
  2. Recognize a corresponding asset at the same fair value
  3. Remeasure both at each reporting date, with changes reflected in the financial statements

This treatment was unusual because traditional custodians (banks holding securities, for example) do not record client assets on their own balance sheets. The SEC justified the requirement by pointing to the unique risks of crypto custody, including technological risks, regulatory uncertainty, and the potential for loss through hacking or key mismanagement.

The impact on banks

The balance sheet recognition requirement under SAB 121 had outsized consequences for regulated banks. Recording large custody-related balance sheet amounts affected capital planning and was widely cited as a major barrier to bank crypto custody expansion.

The rescission

SAB 121 faced strong opposition from the crypto industry, banking sector, and members of Congress. In 2024, Congress passed a CRA resolution to overturn it, but that resolution was vetoed.

In early 2025, the SEC issued SAB 122, which rescinded the SAB 121 interpretive guidance. That removed the staff's prior balance-sheet presentation framework for safeguarding crypto assets.

What the rescission means

The rescission of SAB 121 has several practical effects:

  • Presentation framework change: The SAB 121 balance-sheet presentation model is no longer in effect
  • Policy reassessment: Custodians and auditors must align disclosures and accounting policies with current SEC staff guidance
  • Operational simplification: Some entities no longer need SAB 121-specific reporting workflows

Why SAB 121 matters for crypto accounting

Even after its rescission, SAB 121 remains relevant for several reasons:

  • Historical periods: Companies that applied SAB 121 still need clear documentation of historical treatment and transition decisions
  • Regulatory precedent: SAB 121 demonstrated that regulators can impose unique accounting requirements on crypto assets, and future regulations may take similar approaches
  • Due diligence: When evaluating crypto custodians, understanding whether they applied SAB 121 and how they transitioned after its rescission provides insight into their accounting rigor
  • International considerations: While SAB 121 was US-specific, other jurisdictions have watched this regulatory evolution closely and may develop their own custodial accounting requirements

How Tokenbooks handles custodial accounting

Tokenbooks provides tooling to track crypto assets across custodial arrangements, including valuation context and audit-oriented transaction history. Teams should still validate policy choices with auditors and counsel as guidance evolves.

For more on crypto accounting standards, read our crypto accounting guide or explore how cost basis tracking works across different custodial setups.