Many friends may not know what SAB 121 is and what its role is, so let's briefly introduce it.

SAB 121 is a staff accounting bulletin (SAB) issued by the U.S. Securities and Exchange Commission (SEC) in March 2022, aiming to clarify the accounting requirements for custodial activities involving crypto assets. The bulletin requires entities holding crypto assets to record them as liabilities and record the corresponding assets.

The main contents of SAB 121 include:

• Crypto assets are defined as digital assets issued and/or transferred using distributed ledger or blockchain technology and cryptographic techniques.

• Entities holding crypto assets must record them as liabilities and record the corresponding assets.

This bulletin applies to financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (US GAAP) or International Financial Reporting Standards (IFRS®).

The release of SAB 121 has sparked considerable controversy. Some believe the bulletin is necessary as it helps ensure the security of crypto assets and protects investors, while others think it is overly cumbersome and may hinder the development of the crypto asset industry.

As of May 9, 2024, SAB 121 is still in effect. However, the U.S. House of Representatives voted on May 8, 2024 to pass a bill that would repeal SAB 121.

The bill has not yet been passed in the Senate.

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