US Takes Steps Towards Digital Asset Leadership with Tokenization Friendly Initiatives

On January 23, 2025, President Donald Trump embarked on a mission to transform the digital asset industry by implementing policies, rules, and regulations that promote the responsible growth and use of digital assets, blockchain technology, and related technologies. This move aims to secure America’s position as a global leader in the digital asset space.

Key Initiatives

President Trump issued an executive order, Strengthening American Leadership in Digital Financial Technology, which established a Working Group on Digital Asset Markets. The group is chaired by White House AI and crypto czar David Sacks. Additionally, the US Securities Exchange Commission (SEC) revoked accounting rule SAB 121, which hindered financial institutions from providing digital asset custody services.

Understanding SAB 121 and its Impact

SAB 121 was issued by the SEC Staff on March 31, 2022, in response to the growing number of entities providing digital asset custody services. The rule required entities to recognize a liability and corresponding asset at fair market value for their obligation to safeguard digital assets for customers. This balance sheet disclosure requirement posed significant challenges for banks, increasing their financial burden and potentially deterring them from entering the market.

The rule also required entities to provide detailed disclosures about the nature and amount of digital assets being safeguarded, including risks related to concentrations in digital asset safeguarding. However, the rule did not define safeguarding, leading to confusion and significant judgment requirements for entities.

Revocation of SAB 121 and its Implications

The revocation of SAB 121 is expected to have a positive impact on the digital asset industry. William Quigley, a cryptocurrency and blockchain investor, stated:

“SAB 121 placed a significant restraint on the ability of banks to maintain custody of cryptocurrency assets on behalf of customers… The rescission of SAB 121 will allow banks to tokenize.”

Introduction of SAB 122

The SEC introduced SAB 122, which provides greater flexibility to banks and traditional financial institutions that provide or are interested in providing digital asset-custody services. SAB 122 returns to the pre-SAB 121 accounting principles and standards, allowing entities to report contingent liabilities without requiring a one-to-one asset to liability ratio.

Regulatory Framework and Industry Response

The Working Group on Digital Asset Markets, which includes SEC Acting Chairman Mark T. Uyeda, aims to develop a comprehensive and clear regulatory framework for digital assets. This framework is expected to drive institutional participation in tokenization and broader market growth. The SEC task force has been welcomed by the world’s largest custodian, Bank of New York (BNY), as well as the American Bankers Association and Etherealize.io.

For more news on the digital asset industry and cryptocurrency market, visit Global Crypto News.

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