SAB 121 was the SEC accounting bulletin that, from March 2022 to January 2025, required any entity safeguarding crypto assets for customers to recognise the fair value of those custodied assets as both a liability and an asset on its own balance sheet. The treatment was a structural departure from how custodied assets had historically been reported (off-balance-sheet, as a fiduciary item rather than a principal exposure). For bank custodians subject to prudential capital requirements, the bulletin made institutional crypto custody commercially impractical by forcing capital to be held against assets the bank did not actually own. The SEC rescinded SAB 121 through SAB 122 in January 2025, restoring off-balance-sheet treatment consistent with traditional asset custody. The rescission is the single largest US regulatory unlock for institutional digital-asset custody to date and is the prerequisite that allowed BNY, State Street, and other GSIB custodians to scale their digital-asset custody programmes.
Scope
SAB 121 applied to any SEC registrant that had an obligation to safeguard crypto assets for another party. The bulletin defined the obligation broadly enough to catch traditional custodians (banks, trust companies, broker-dealers acting as custodians) and crypto-native custodians (Coinbase Custody, BitGo, Anchorage). The asset side of the entry was the safeguarded crypto at fair value; the liability side was the obligation to deliver the asset back to the customer. Both moved through the registrant's income statement on a fair-value basis, generating earnings volatility tied to crypto price movements that the registrant did not actually bear economically.
The bulletin did not apply to non-SEC-registrants (most state-chartered trust companies, most credit unions). It also did not apply to crypto exposures the registrant held for its own account, which were already on-balance-sheet. The asymmetric impact was on bank custodians, because banks are SEC registrants when they have publicly listed parents and they sit under separate prudential capital requirements that recognise on-balance-sheet items.
Mechanics under the rescinded regime
A bank custodian holding $10B of customer crypto under SAB 121 had to recognise $10B of assets and $10B of liabilities at fair value. Under prudential capital frameworks (the Basel III standardised approach implemented by the OCC and Federal Reserve), assets generally attract risk-weighted capital. The bulletin's interaction with the prudential rules was the binding constraint: the bank had to hold capital against the customer's crypto position even though the bank's economic exposure was zero. For a custodian operating at scale, the capital cost ran into hundreds of millions of dollars per $10B of custody, which made the business economically unviable relative to traditional custody (off-balance-sheet, no equivalent capital charge).
The structural consequence was a bifurcated US custody market. Crypto-native custodians (Coinbase Custody, BitGo, later Anchorage), which were not bank-prudentially-regulated in the same way, dominated the institutional crypto-custody business. Bank custodians (BNY, State Street, JPMorgan) stayed at the perimeter, offering custody for crypto ETPs and fund products under specific exemptions but not at the scale their traditional asset-custody businesses operated.
Rescission via SAB 122
SAB 122 was issued in January 2025 as a one-line bulletin rescinding SAB 121 and reverting custodian accounting to the pre-2022 default. Custodians no longer recognise fair-value gross-up on safeguarded crypto. The bulletin resolved itself through the existing accounting literature on safeguarded assets: the custodian's obligation is a fiduciary one rather than a principal one, and the assets sit off-balance-sheet, with appropriate footnote disclosure.
For bank custodians, the immediate consequence was that the prudential capital constraint disappeared. Crypto custody became economically viable on the same basis as traditional custody. BNY's Digital Asset Custody platform, State Street's digital-assets business, and JPMorgan's custody offering all expanded their addressable mandate scope from the rescission date.
Status
Rescinded effective January 2025. The replacement framework is the pre-existing accounting literature on safeguarded assets, with no SAB-specific guidance on crypto custody. The SEC has not issued a substantive replacement bulletin, on the view that the existing literature is adequate for the question.
Implications for tokenisation
Three things follow.
First, the institutional custody pipeline is now structurally open. Tokenised assets (tokenised MMFs, tokenised securities, tokenised deposits) require qualified custody under the relevant fund or securities frameworks. Before SAB 121 rescission, the qualified-custodian set for tokenised assets in the US was effectively limited to crypto-native firms. Post-rescission, GSIB custodians can compete on the basis of their existing brand and operational scale. The structural picture is closer to what most institutional allocators expected from the start: blue-chip custodians winning the bulk of institutional mandates with crypto-native custodians taking specialised slices.
Second, the GENIUS Act pathway opens. GENIUS requires permitted stablecoin issuers to hold reserves in narrowly-prescribed asset categories with custody segregation; the rescission allows banks to compete for the reserve-custody mandate without absorbing a prohibitive capital cost. The reserve-custody business for major USD stablecoins is now an addressable market for BNY, State Street, JPMorgan, and others. For CLARITY Act-perimeter products (digital commodities and the eventual tokenised-securities perimeter), the same is true.
Third, the OCC trust-bank charter race becomes more meaningful. Without SAB 121, the OCC's interpretive letters allowing national banks to provide crypto custody (the IL 1170 / IL 1172 / IL 1174 sequence and the April 2026 final rule on non-fiduciary trust bank activities) would not have produced the scale of charter applications they did through 2025-2026. The rescission and the OCC chartering pathway are operating together as the structural unlock for institutional crypto custody.
Open questions
- Whether the SEC will issue substantive replacement guidance on crypto custody accounting. The current state is reliance on existing safeguarded-asset literature without a tokenisation-specific overlay.
- How tokenised deposit accounting is treated under the rescinded regime. JPMD on Base sits on a public chain custodied through whatever path the holder chooses; the bank-side accounting is the same as a traditional deposit liability, but the holder-side custody question is unsettled for institutional holders running their own omnibus custody.
- Whether a future SEC under different leadership reintroduces SAB 121 or a similar bulletin. The accounting question has policy weight beyond the technical merits.