BPI and Coalition of Trades Call for Changes to SAB 121

Dear Chair Gensler:

The Bank Policy Institute (“BPI”), the American Bankers Association (“ABA”), the Financial Services Forum (“the Forum”), and the Securities Industry and Financial Markets Association (“SIFMA”) (collectively, the “Associations”[1]) write to request that the Securities and Exchange Commission (“Commission”) consider targeted modifications to Staff Accounting Bulletin No. 121 (“SAB 121”) to address recent policy developments and the challenges that SAB 121 has posed for U.S. banking organizations since it was issued on March 31, 2022.[2]

As the two-year anniversary of the issuance of SAB 121 approaches, the Associations believe now would be an appropriate time to examine and discuss the implications of SAB 121 for regulated banking organizations.[3] There have been several relevant developments during this two year period, including the GAO report issued in October,[4] approval of certain Spot Bitcoin ETPs,[5] and the SEC’s proposed rule on Safeguarding Advisory Client Assets that would cover the custody of digital assets if finalized as proposed.6 The Associations believe that SAB 121 can be modified to mitigate the specific challenges identified herein without undermining the stated policy objectives of the Commission to enhance the information received by investors and other users of financial statements.

To read the full comment letter, please click here, or click on the download button below.


[1] More information about the Associations is available in Appendix A.

[2] Staff Accounting Bulletin No. 121, Securities and Exchange Commission (March 31, 2022) (link). SAB 121 includes interpretive questions addressing: (i) How covered entities should account for their obligations to safeguard crypto-assets held for platform users (the “on-balance sheet requirements”), (ii) what disclosures staff would expect in those circumstances (“the disclosure requirements”), and (iii) when the guidance in SAB 121 should be applied to financial statements.

[3] For purposes of this letter, the term “banking institution” should also be taken to include securities broker- dealers that are regulated by the SEC. SAB 121 impacts regulated broker-dealers as a result of the net capital rule (15c3-1), which treats the on-balance sheet items as non-allowable assets.

[4] GAO: “Securities and Exchange Commission—Applicability of the Congressional Review Act to Staff Accounting Bulletin No. 121,” File B-334540 (Oct. 31, 2023) (link).

[5] See Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to List and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust Units, Securities Exchange Act Release No. 34-99306 (Jan. 10, 2024) (link).

[6] SEC Release No. IA-6240, 88 FR 14,672 (March 9, 2023) (link).